Indirect tax ebook - Canada

Scope

Canadian sales taxes are levied at both the federal and provincial level. The federal government administers the value added Goods and Services Tax and the Harmonized Sales Tax. Federal audits and administration is undertaken by Canada Revenue Agency. Where applicable, provinces administer their own provincial sales tax. 

Goods and Services Tax (“GST”)/Harmonized Sales Tax (“HST”)
The GST is applied federally at 5% and is a value added tax that applies to the value of the consideration on most goods and services supplied or imported into Canada. Most GST registrants are entitled to recover GST paid on expenses by claiming an input tax credit (“ITC”).

The provinces of Newfoundland and Labrador, New Brunswick, and Nova Scotia have replaced their provincial sales taxes and combined it with the GST to create the Harmonized Sales Tax (“HST”). The tax base for GST and HST is the same. The current HST rate is 13%.

Commencing July 1, 2010, the provinces of Ontario and British Columbia are proposing to eliminate their provincial retail sales tax and have a value added Harmonized Sales Tax. The HST in Ontario will be 13% and in British Columbia, it will be 12%. Large businesses will see restrictions from claiming refunds in Ontario and British Columbia on certain expenses.


Quebec Sales Tax
The Quebec Sales Tax (“QST”) is also a value added tax and applies only to supplies made in the province of Quebec. Generally, the rules governing the application of QST have been harmonized with those for GST. Most QST registrants are entitled to recover QST paid on expenses by claiming an input tax refund (“ITR”). Large businesses with revenues in excess of $10 million are restricted from claiming refunds of ITRs on certain expenses such as utilities, fuel, telecommunication and meals and entertainment.

QST currently applies at the rate of 7.5% of the consideration for a taxable supply plus the applicable GST resulting in an effective rate of 7.875%.

Commencing January 2011 the QST rate is proposed to increase to 8.5%.


Provincial Retail Sales Taxes
Most other provinces impose their own retail sales tax (“RST”). Unlike the GST/HST and the QST, the RST is not a value added tax and is not recoverable. RST is administered in the provinces of British Columbia, Manitoba, Saskatchewan, Ontario and Prince Edward Island. The tax application and registration requirements can vary by province.

The province of Alberta does not have an RST and years ago the provinces of Newfoundland and Labrador, Nova Scotia and New Brunswick eliminated their RST and harmonized their tax with the federal GST to create the federal HST. Ontario and British Columbia propose to do the same commencing July 1, 2010.

Most supplies of tangible personal property are taxable for RST purposes. Certain services are also subject to RST.


Other Taxes
In addition to sales taxes, other levies or taxes can be applied at the federal, provincial or municipal level. These include excise taxes on fuel, tobacco, air transportation and insurance. A land transfer tax is also imposed in some provinces on the purchase of real property.  

• Introduction
• Scope
• Registration
• Tax rates
• Reporting & filing
• General tax application/Time of supply