Canadian HST

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In Canada, you may find that in addition to the goods and services tax (GST), some territories and provinces have an additional form of sales tax they call the provincial sales tax (PST). In majority of the provinces, the GST is harmonized with PST to come up with what is called the Harmonized Sales Tax (HST). The rates may be different for the provincial sales tax, but the GST rate remains at 5%. Any business that is charging HST meaning both GST and PST will be able to claim the credits (Input tax credits – ITC) for the purchases that they made in time of their commercial activity. When filing for their HST returns, business owners can claim for their ITC or input tax credits. The input tax credits are supposed to be 100 percent of the HST that you incurred on supplies made for commercial activities. However, you should realize that you cannot claim input tax credits if the purchases made are related to providing supplies that are regarded or classed as exempts. Also, in most of the cases, HST paid on entertainment and meals only allows for 50% recoverable amount, so the other 50% may not be considered a deductible expense.

HST Rates

Where HST charges prevail, the rates encompass both the provincial sales tax and goods and services tax. The provincial sales tax rates may differ from one territory or province to another, and also not all territories and provinces charge the provincial rates. Where a province or territory does not apply PST, then the GST applies. For the case of Ontario, the HST is at 13%, a rate that became effective from the 1st of July 2010. The British Columbia returned to the GST rate of 5%, but before then, they had a HST rate of 12%.

Other provinces and territories that have maintained the HST system include New Brunswick, Nova Scotia, Newfoundland and Labrador, and Prince Edward Island where the rates of HST are at 15%.

A business will charge HST if it exceeds the limit of $30,000 that is considered a small supplier. A business may be a partnership, corporation, or sole proprietor and the taxable revenues before the expenses are deducted should be more than $30,000 in order for them to charge and pay the HST amount. If it’s a non-profit entity, the total taxable revenue should be more than $50,000 in order to be required to pay the tax. There are, however, businesses that regardless of their scale of operation, may not be classed as small supplier, for example, taxi and limousine operators. These have to get a GST account no matter the size of their income.

If you want to calculate the HST charge, you can use a HST calculator. The calculator has been programmed with the different PST rates and the standardized GST rates to have one single valued added sales tax that is called the HST. For example, if you use a GST/HST calculator, you find that for Alberta, CA, the rate is only 5% because this territory has not implemented the harmonized sales tax system. In other words, there is no provincial sales tax and the territory only uses the goods and services tax that is charged by the federal government.

The Canada Revenue Agency (CRA) is the only body that is responsible for collecting the provincial sales tax from the different territories. Although the territories or provinces have implemented the HST system, they cannot collect the taxes for themselves.

If you want to calculate the tax manually, you may use this formula;

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HST Calculation Formula:

HST Amount = Amount with out Sales tax*(HST Rate/100)

Another formula for calculating HST is; 

HST Registration

Registering for HST is the same as that of GST and therefore a business will need to visit the Canada Revenue Agency website page. You may also call CRA at 1-800-959-5525. A business number is needed prior to registering for the HST account.

In Quebec, you can register for HST by going to the Revenu Quebec web page or calling 1-800-567-4692. The date of registration depends on whether it is a voluntary registration or mandatory registration. Registering on voluntary basis even when you have not exceeded the limit for small supplier (meaning your revenues for the four calendars quarters has not surpassed $30,000 for a business or $50,000 for a non-profit organization) allows you to get input tax credits for the HST or GST amount that you paid. In essence, you find that most of the rules for registering for GST also apply for the HST.

You may not register for HST account if you provide HST exempt goods and services such as child care services, used residential housing, and music lessons. You may want to know what kind of services and goods are exempt of HST and GST.

Even when you don’t qualify for HST, you may want to register because it has some advantages. No matter the type of business you are doing, you directly or indirectly pay for HST on taxable goods and services that you acquire during the time of your commercial activity. If you have registered for HST, you can recover part of the HST amount you paid out for business purchases in what is called input tax credits. You may feel that because you are classed as a small supplier, there is no need for you to register for HST account. It makes sense if you have this account because of the input tax credits benefit.

One thing for sure is that you are paying for tax whether you are registered or not, because there are purchases you will make as a business. If you don’t have a HST account, there is no way you can get back the HST amount you paid out. You find that the amount you are paying as a small supplier to acquire services and supplies during the year may be quite a lot even if it does not reach the threshold of $30,000. So, there is economic sense when you have the HST account. Also, input tax credits are considered stackable, but only for a period of four years. The amount for the four years can total to huge chunk of money that could just be lost somewhere because you have not been able to claim it.

HST Rebate 

You may also apply for a rebate in case you made an error when charging the HST. This allows you to get a refund for the amount that you have paid and which you shouldn’t have paid. The HST rebate depends on the situation at hand. For example, the rebate application or claim for refund should be done within two years from when you remitted the amount deemed to be in error. If that period expires, you may not be able to get the refund. You also need to know that that you only submit one rebate application for a calendar month. The information required includes; the reason you say that the amount shouldn’t be remittable or payable and the way you did the calculations. You may want to provide copies of purchases and receipts to support your claim.