HST filing in Canada

Goods and services Tax (GST) and Harmonized Sales Tax (HST) are imposed on the value of taxable supplies made in Canada such as, sales, lease and other transactions. A GST registrant must charge GST on all taxable supplies made in Canada. GST is a sales taxed charged by federal government, while Provincial Sales Tax (PST) is charged by certain provinces. Some provinces, known as participating provinces, have harmonized their PST with the GST, resulting in a combined tax called the HST. When the CRA administers HST, the GST portion is remitted to the federal government, and the PST portion is remitted to the participating provinces. The HST participating provinces, where HST rate is applies are as follows:

• New Brunswick
• Newfoundland and Labrador
• Nova Scotia
• Ontario
• Prince Edward Island

The federal GST rate is 5% on the taxable supplies made in Canada, while provinces PST rates vary. The table below shows the applicable sales tax rates by province, including the combined HST rates for participating provinces.

Sales Tax Rates by Province/Territory

Province / Territory	GST	PST	HST	Total Tax Rate
Alberta	5 %	—	—	5 %
British Columbia	5 %	7 %	—	12 %
Manitoba	5 %	7 %	—	12 %
Saskatchewan	5 %	6 %	—	11 %
Quebec	5 %	9.975 % (QST)	—	14.975 %
Northwest Territories	5 %	—	—	5 %
Yukon	5 %	—	—	5 %
Nunavut	5 %	—	—	5 %
Ontario	—	—	13 %	13 %
New Brunswick	—	—	15 %	15 %
Nova Scotia (since Apr 1, 2025)	—	—	14 %	14 %
Newfoundland and Labrador	—	—	15 %	15 %
Prince Edward Island	—	—	15 %	15 %

 

When do you have to register for GST/HST and what is filing requirements

If you make a taxable supply (Sales) of less than $30,000 in any single calendar quarter or in the last four consecutive calendar quarters, you are considered a small supplier and are not require to register for or charge GST/HST on the sale. Registration is optional in this case, meaning you may still choose to register for GST/HST and charge tax on the taxable supplies. Voluntary registration may be beneficial if you pay HST on your business purchases that exceed the GST/HST you would collect from customers. In this case, you can claim the HST paid on purchases as Input Tax Credits (ITCs), which may result in a GST/HST refund.

If you are not a small taxable supplier, you must register, charge, collect and remit GST/HST to the CRA. You must also file a GST/HST return, similar to other filing requirements such as the income tax return, by the applicable deadline, and remit the tax owing by that date. If you are a small supplier but your sales exceed $30,000 in the current year, you must register for GST/HST by the following date;

1. If you exceed $30,000 in a single calendar quarter

• You are immediately no longer a small supplier.
• You must register for GST/HST:
  • As of the day you made the sale that pushed you over $30,000.
  • You must charge GST/HST on that sale and all sales after it.

Example:

• In March (Q1), your sales hit $29,000.
• On March 15, you make a $3,000 sale → now total = $32,000.
• That March 15 sale and all sales after must have HST charged.
• You need to register effective March 15.

2. If you exceed $30,000 over four consecutive calendar quarters

• You are no longer a small supplier at the end of the month in which you exceeded $30,000.
• You must register for GST/HST:
  • Within 29 days of that day.
  • You start charging GST/HST on the first day of the month after you cease being a small supplier.

Example:

• Q1: $8,000, Q2: $9,000, Q3: $7,000, Q4: $10,000 → total = $34,000.
• End of Q4 = December 31.
• You ceased being a small supplier on December 31.
• You must register within 29 days (by January 29).
• You start charging GST/HST on January 1.

 

Filing frequencies for reporting depends on the size of the business’s annual sales (taxable supplies), including zero-rated supplies. The table below shows the filing frequency of GST/HST returns;

Annual Taxable Supplies (worldwide, including associates)	Default Filing Frequency	Optional Choices
≤ $1,500,000	Annually	Quarterly, Monthly
$1,500,001 – $6,000,000	Quarterly	Monthly
> $6,000,000	Monthly	None

 

 

Do I have to pay instalment for GST/HST

GST/HST instalments are required for annual filers whose GST/HST payable for the preceding period is $3,000 or more. Instalments are not required for filers who report quarterly or monthly. If you are required to pay instalments, you can choose one of the following two methods for calculating the amount to remit:

• Prior-year method: four equal instalments, each equals to 25% of the net tax from the previous year
• Current-year method: four equal instalments, each equals to 25% of the estimated net tax owing for the current year. If instalments are estimated based on the current year and the instalment payments made are less than the amount that actually should have been paid, instalment interest will be charged on the difference.

Instalments are payable within one month after the end of each fiscal quarter and your final balance owing on GST/HST return is typically due on the same date as the deadline. If you are an individual with a business income and year-end December 31, the balance owing on your GST/HST return must be paid by April 30 of the following year.

Interest and penalties for late filing returns and payments

Interest

If you are required to pay instalments, any late instalment or final payment is subject to interest. The interest rate charged by CRA is based on prescribed rate, which is set quarterly by CRA. Interest on instalment is compounded daily on the amount you should have paid but did not. The interest rate is usually the basic prescribed rate plus 4% on overdue taxes.

For example:

Instalment due: $5,000 on June 15.

You paid only $2,000.

Shortfall = $3,000.

CRA charges daily compound interest on $3,000 from June 16 until you pay.

Penalties

If the interest charges are higher than $1,000, a penalty may also be charged. This combined both the late filing and balance owing calculated as below

 

1. Failure to file HST return on time

Penalty = 1% of the amount owing

                      Plus

0.25% of the amount owing for each full month the return is late
(to a maximum of 12 months).

2. Instalment penalty

• Charged if your instalment interest (on missed/late instalments) exceeds $1,000.
• Formula: (Actual interest × 25%) – $1,000 = Penalty (if positive).

These two are the most common penalties charged by the CRA. However, additional penalties may apply for making a false statement (e.g. to reduce HST payable) or for negligence, which can further increase the total penalties. Therefore, it is important to ensure your GST/HST return is taken care of properly.

Our firm provides complete support in preparing and filing accurate returns to ensure compliance with the Canada Revenue Agency requirements.

Did you know:  As a director of your corporation, you are also jointly and severally liable, together with the corporation, to remit any net GST/HST, plus applicable interest and penalties, owing by the corporation. This means that if you corporation does not pay the GST/HST owing, the CRA pursue you personally, even if you dissolve the corporation for outstanding balance.

 

Filing options for small businesses in Canada

If your business provides taxable supplies including goods and services, you may be  required charge and collect GST/HST. However, you are also entitled to recover the GST/HST you paid on the purchases of goods and services used to provide those taxable supplies. This recovery of GST/HST is called an Input Tax Credit (ITC). ITCs are applied against the GST/HST you collected; the resulting difference is remitted to the CRA. If the result is negative (i.e., your ITCs exceed the tax collected), you may receive a refund of the excess.

 

Under the regular method of calculating GST/HST payable, you first determine the GST/HST you collected on your business transactions, then deduct the GST/HST you paid on allowable business expenses. GST/HST paid on allowable expenses is referred to as Input Tax Credits (ITCs).

A small business may reduce compliance costs by choosing one of the available options –  either the Quick Method or the Simplified Method –  to determine the amount of net GST/HST remittance for a period.

Quick Method

This method is available if your taxable supplies (including zero-rated supplies) for either the first four or the last four consecutive fiscal quarters out of the previous five are $400,000 or less, including GST/HST. This option is not available for persons providing legal, accounting, or consulting services. You must elect to use this method, and it remains in effect as long as you continue to qualified.

GST/HST payable calculation under Quick Method

First, you apply the specific remittance rate to revenue from taxable supplies, including GST/HST but excluding zero-rated supplies. Then, deduct the lesser of 1% of $30,000 or 1% of your taxable supplies made during the year (excluding zero-rated supplies). From the balance, deduct ITCs on capital expenditures and purchases ( such as computer, machinery, furniture etc.)

Examples

Scenario

• Province: Ontario (HST = 13%)
• Business Type: service
• Quick Method Remittance Rate (Ontario): 8.8%
• Annual revenue from services: $60,000 + HST = $67,800
• Capital purchase: Laptop for $2,260 (including HST)

1. Total Collected from Clients

• $60,000 + 13% HST = $67,800
• HST collected = $7,800

2. Amount to Remit Using Quick Method

• Remittance rate = 8.8% of $67,800 = $5,966.40

3. Keep the Difference

• You collected $7,800 in HST, remit only $5,966.40
• You keep: $7,800 – $5,966.40 = $1,833.60

4. 1% Credit on First $30,000 in Taxable Supplies (Excl. HST)

• 1% of $30,000 = $300 credit

5. Capital Expenditure (Laptop)

• Total cost: $2,260
• HST included: $2,260 ÷ 1.13 = $2,000 (base) + $260 HST

So, the total benefit to you is $2,393.60 (1,833.60 + 300 + 260).

The advantage of this method is that you do not have to keep detailed records of GST/HST paid on current expenses. In addition, the Quick Method may result in tax savings.

However, the difference (savings) must be reported as your business income, since it is considered taxable government assistance. If the GST/HST paid on purchases is higher than the GST/HST collected, the regular method may be beneficial, the Quick Method does not allow you to claim ITCs on most purchases.

The remittance rates for the Quick Method, which vary by province, can be found in CRA’s published tables.

https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/rc4058/quick-method-accounting-gst-hst.html#Rmttnc_rt_chrt

 

Simplified Method

The Simplified Method is used to calculate ITCs only. Similar to the Quick Method, no detailed record keeping is required under this method, except for GST/HST paid on capital expenditure for real properties. To qualify to use the Simplified Method, taxable supplies made in the previous fiscal year must be less than $1 million, including zero rated supplies, and annual taxable purchases for the preceding fiscal year must be $4 million or less, excluding zero-rated purchases.

The ITC is calculated as follows;

Taxable purchases including GST X [GST/HST rate/(100 + GST/HST rate)]

Example

Province: Ontario (HST = 13%)

Business Type: service-based

Annual Revenue (Excluding HST): $100,000

Purchases: $50,000 (including HST)

Reporting Period: Quarterly (for simplicity, we’ll consider quarterly reporting here)

 

1. Calculate HST Collected from Clients:

• Taxable Sales (excluding HST): $100,000
• HST collected on these sales (13% of $100,000):

HST Collected=100,000 × 13% = 13,000

So, you collect $13,000 in HST from clients.

2. Calculate Remittance Using the Simplified Method:

• Total purchases (including HST): $50,000

ITC = $50,000 x 13/113 = $5,752.21

HST payable = $13,000 – $5,752.21 = $7,247.78

So, under the simplified method, you would remit $7,247.78 to the CRA.

If you purchased real property, such as land, building, or a lease for business purposes, you could claim additional ITCs on it. However, ITCs cannot be claimed for personal used but can be claimed for the portion used for business purposes. For meals and entertainment- related expenses, only 50% of the ITC can be claimed.

GST/HST on Purchase of Residential Property in Canada

The GST/HST treatment on the purchase of a house in Canada depends on whether the property is newly constructed or previously occupied (used property), as well as the intended use of the property.

1. Newly Constructed or Substantially Renovated Property

This includes new houses, condominiums, and townhouses. In most cases, these properties are considered taxable supplies under the Excise Tax Act.

• Principal Residence
  • When you purchase a new home for your own use as a principal residence, GST/HST is generally included in the purchase price.
  • Builders usually account for GST/HST in the sale price and may also apply the GST/HST New Housing Rebate directly to reduce your closing costs.
  • As a result, in practice, you do not pay GST/HST separately at closing, but it is embedded in the total purchase price.
• Rental / Investment Property
  • If you buy a new residential property for investment (e.g., to rent out), GST/HST is generally payable on closing.
  • You may be eligible for the GST/HST New Residential Rental Property Rebate (NRRPR), which can refund a portion of the GST/HST paid (up to approx. $24,000)
  • To qualify, the property must be rented out on a long-term basis (usually a lease of at least one year).
• Other Uses
  • If the property is purchased for purposes other than as a principal residence or long-term rental (e.g., flipping, short-term rentals like Airbnb, or resale inventory for builders), GST/HST applies in full and no rebate is available.

2. Used Residential Property

• The purchase of a used (previously lived-in) home is generally exempt from GST/HST.
• You do not pay GST/HST on the purchase price.
• However, incidental costs (e.g., legal fees, real estate commissions, home inspection, renovations after purchase) may still attract GST/HST where applicable.

If you purchased any properties during the year and need to understand the GST/HST implications, or if you want to claim a GST/HST rebate on your new rental property, please contact one of our tax specialists for assistance.

 

Sale of principle residence or investment property shortly after purchase

Your principal residence (house, condo, or other qualifying property) is generally considered capital property. When you sell it, any profit would normally result in a capital gain. However, you may be eligible to claim the principal residence exemption, which can eliminate or reduce the taxable capital gain for the years you designate the property as your principal residence.

However, if you sell a property (whether a principal residence or an investment property) shortly after purchase, the property flipping rule may apply. Under this rule:

• The gain is treated as business income, not capital gain.
• Business income is fully taxable (100%), compared to only 50% of a capital gain being taxable.
• The principal residence exemption cannot be used if the CRA reclassifies the sale as business income.

This flipping rule applies to sales of residential properties on or after January 1, 2023. The CRA generally considers a property to fall under this rule if it is sold within 12 months of purchase, unless an exception applies (such as death, separation, disability, relocation for work, etc.).

Can I claim GST/HST rebate on expenses for employment purpose in Canada

If you are required to pay certain expenses for employment purposes, and these expenses are not reimbursed by your employer (as certified by Form T2200), you may be eligible to claim a GST/HST rebate on the portion of those expenses where GST/HST was paid.

The rebate is calculated by applying a predetermined factor to the deductible amount of your expenses:

• Ontario: 13/113
• Nova Scotia, New Brunswick, Newfoundland and Labrador, and Prince Edward Island: 15/115
• Alberta, British Columbia, Quebec, Saskatchewan, Manitoba, Nunavut, Northwest Territories, and Yukon: 5/105

Reporting the Rebate

• The rebate you receive is taxable income and must be included in your income in the year you receive it.
• If part of the rebate relates to capital cost allowance (CCA) claimed on employment expenses, that portion should be applied to reduce the undepreciated capital cost (UCC) of the asset instead of being included in income.