Canada levies a goods and services tax (GST) on the supply of most goods and services in the country, including imports. Additional sales tax is levied in most provinces. Certain provinces maintain their own provincial sales tax (PST) system, while others have harmonized their provincial rates with the federal GST system, which is referred to as harmonized sales tax (HST). The HST is administered at the federal level.

Under the Canadian tax laws, certain corporations and partnerships that are considered as members of a ‘qualifying group’, can elect to treat certain taxable supplies between them as having been made for no consideration, subject to satisfying prescribed conditions. Effective from 1 January 2015, the taxpayer is required to file such election with the tax authorities in the prescribed form within the applicable due dates.

In determining the value of goods or services subject to GST/ HST, all input costs incurred in the making of the supply are to be considered. Unless specifically exempt, the cost includes taxes, duties, and fees, which were either paid/ payable directly to the supplier or embedded in the cost of goods or services, due to taxes being paid earlier in the supply chain. In April 2016, the tax authorities issued a detailed memorandum on the application of GST/HST to other taxes, duties, and fees, outlining the nuances of computing GST on other taxes, duties and fees.

The standard rate of GST is 5%, and provincial rates range from 0% to 10%. The combined rates for the different provinces are as follows:

Harmonized Sales Tax

New Brunswick	15%
Newfoundland and Labrador	15%
Nova Scotia	15%
Ontario	13%
Prince Edward Island	15%

Provincial Sales Tax + Goods and Services Tax

British Columbia	12%
Manitoba	11% (effective 1 July 2020, previously 13%)
Quebec	14.975% (generally harmonized with GST but administered separately)
Saskatchewan	11% (effective 23 March 2017, previously 10%)

Goods and Services Tax Only

Alberta	5%
Northwest Territories	5%
Nunavut	5%
Yukon	5%

Exempt Supplies Include:

Financial services excluding payment card clearing services;
Healthcare services including certain services rendered by a multidisciplinary team of licensed health care professionals (effective 20 March 2019);
Education; and
Used residential property.

Zero-Rated Supplies Include:

Exports, including goods and services;
Basic foodstuffs;
Prescription drugs and medical devices;
International transportation; and
Certain supplies of footcare devices (effective 20 March 2019).

COVID-19 Emergency Measures

In response to the COVID-19 pandemic, Canada announced a zero VAT rate for face masks and face shields until public health officials no longer broadly recommend their use for the COVID-19 pandemic.

Registration Threshold

Any supplier of goods and services in Canada is required to register for GST/HST unless their annual worldwide revenue from taxable and zero-rated supplies is less than CAD 30,000. Suppliers that exclusively make exempt supplies, or non-residents that do not carry on business in Canada are also generally exempt from registration.

Suppliers that are not required to register, may generally do so voluntarily, including non-residents.

When making supplies in provinces not harmonized with GST, the GST threshold applies, but a separate registration process for PST may be required.

Returns and Payments

Taxpayers are required to file returns and make corresponding tax payments electronically based on the annual turnover in the following manner:

Taxpayers with annual turnover exceeding CAD 6 million - monthly;
Taxpayers with annual turnover between CAD 1.5 million and CAD 6 million – quarterly; and
Taxpayers with annual turnover not exceeding CAD1.5 million – annually.

The monthly and quarterly returns are required to be filed along with tax payments within one month after the end of the reporting period. The annual return is due within three months after the end of the fiscal year.

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