If you’ve been collecting Goods and Services Tax (GST) or Harmonized Sales Tax (HST) from your customers for the goods or services you’ve provided them as a business, it’s important to understand how to remit those taxes back to the government.
Filing a GST/HST return also refers to claiming the GST/HST you pay on services or supplies that you need to run your business. Those purchases could be eligible for a credit, up to a certain limit. This credit is commonly called a ‘write-off’ or ‘business expense’. Check the Government of Canada’s website to see if you qualify for ITC (input tax credit) savings.
If you’re a first-time business owner, navigating the complexities of new business registration and then filing a GST/HST return may seem more complicated than filing your personal income tax. The information required and the process of filing the return are both very different. Whether you decided to register a sole proprietorship or went through incorporation, you’ll need to manage your GST/HST obligations once your business reaches the registration threshold or if you’ve voluntarily registered. The filing requirements remain largely the same regardless of your business structure, though incorporated businesses may have additional documentation considerations. But as we’ll show you here, by following some basic directions you’ll be able to file your first GST/HST return with ease.
What is a GST/HST number?
A Goods and Services Tax (GST) is a unique tax identification number that is assigned to your business by the Canada Revenue Agency (CRA). It is also known as your business number (BN), as you will use it to collect, report, and remit GST and Harmonized Sales Tax (HST) to the CRA. It’s also used to identify any other business activities your company has with the CRA, such as payroll deductions or corporate income tax.
Your GST/HST number is part of your business number (BN). So, if you don’t already have a BN, you will be assigned one when you register for a GST/HST number.
When do I file my GST/HST return?
The Canada Revenue Agency (CRA) assumes that you’ll file your GST/HST return once in a year. You may be able to opt to file on more frequent reporting periods, but most small businesses are not required to file more than once a year.
After you’ve registered for your GST/HST number, the CRA will mail you a personalized GST or HST return form, which includes the date when you are required to file your return.
If you are a sole proprietor, the deadline for filing your GST/HST return and making any outstanding payments is usually aligned to the deadline for filing your personal income tax return. Your personal income tax return form will confirm the deadline for filing your GST/HST return.
Corporations typically have the same fiscal year-end for both income tax and GST/HST purposes. If a corporation wants to follow a different GST/HST fiscal year-end, they have to receive CRA’s consent. If your corporation has a calendar fiscal year-end (i.e. December 31st), your GST/HST return must be filed by June 15th of the following year and your payment must be made by April 30th of the following year.
If your corporation has a non-calendar fiscal year-end (i.e. a date other than December 31st), your GST/HST return must be filed and payment must be made no later than three months following your fiscal year-end. While most corporations file their GST/HST return on an annual basis, others file more frequently, such as monthly or quarterly. For more information on when to file your GST/HST return, visit the Revenue Canada website
Choose an accounting method
The first step is to determine which accounting method is best suited to your specific situation. Many businesses opt for the standard method where you pay the difference between how much GST/HST you’ve collected, and any input tax credits that you’ve earned. The CRA also allows two additional methods: the quick method and the simplified method.
The quick method allows you to calculate the GST or HST you owe by multiplying the tax you’ve collected on sales to customers using a specific “remittance rate.” This may be a faster and easier way to calculate what you owe, versus using the standard method. However, not all businesses are eligible. For example, accountants, lawyers, and financial advisors cannot use the Quick Method. Check out the Canadian government’s GST/HST guide, “ Who can make this election, ” to find out if you’re eligible.
The simplified method uses a single formula to help businesses file a GST/HST return and claim the ITC. All you need to do is add up all your eligible business expenses, multiply it by a fixed amount, which is based on the rate at which you paid tax, and then add any additional amounts that apply to your situation. This method reduces the compliance effort businesses have to put in to separately record their GST and HST.
It’s advised to work with an accountant to arrive at a method that’s best for your situation. They can help you understand the impact of choosing one method over the other.
Fill out your return form
Once you’ve taken care of the above (registered for your GST or HST number, selected an accounting method, confirmed the due dates for your return, and any payments you might owe), it’s time to complete the actual GST/HST return.
The paperwork the CRA will send you includes two parts:
- A “working copy” of your GST/HST return, which allows you to work through all of the required calculations (yours to keep for records)
- The actual tax return form, which includes the information you need to submit to the CRA
On the working copy, you enter the following information:
- Total sales and other revenue
- Total tax you’ve collected
- Total tax you’ve paid
- Any other credits or debits
After you’ve completed these steps, you’ll be able to calculate if you are owed a refund or if you need to pay the CRA.
What happens if you don’t file a GST/HST return on time?
According to the CRA late filing penalty guidelines, the penalties can vary depending on the specifics of the situation. A penalty of $250 is issued if you receive a demand to file and do not do so, and there are also penalty fees for filing incorrectly.
Complete and file your return
The final step in preparing your return is to transfer all applicable figures from section (a) (the working copy) to the actual return form. Then you’ll be ready to file and complete your return.
You can mail in your GST/HST return to the address printed on it. The form also includes a four-digit access code to file your return electronically.
How do I file using GST Netfile and HST Netfile online?
The CRA allows four methods to file your return remotely. You can do so through your bank or credit union, your computer (NETFILE), by phone (TELEFILE), or via third-party software the CRA has certified for filing GST/HST returns.
How do I pay the GST/HST for my small business?
Once you’ve filed your return, it’s time to remit the balance you owe. You can do this through your financial institution by adding the correct Federal account as a payee, the way you would add any other service provider you pay electronically. Under “Add a Payee,” look for something like “Federal – GST/HST Payment – GST-P (GST-P), and send the amount you owe.
You can also pay online directly through CRA My Account, in person at a financial institution or Canada Post outlet, or by mail. The CRA provides a complete list of all the ways you can remit your GST/HST.
There are different benefits for corporations and sole proprietors as it relates to your taxes. You can take advantage of these by registering or incorporating your business with Ownr. For corporations specifically, our managed corporation plan provides ongoing compliance support and documentation management to help you maintain your tax advantages while reducing the administrative burden of running an incorporated business.
This article offers general information only, is current as of the date of publication, and is not intended as legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. While the information presented is believed to be factual and current, its accuracy is not guaranteed and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the author(s) as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by RBC Ventures Inc. or its affiliates.