Sellers are being reminded of their tax obligations in Canada, mainly as a result of the end of the 12-month transition period for the new Mall Tax (MTC) rules announced by the Canada Revenue Board. Amazon reminds sellers to provide a valid GST/HST (Federal) registration number to enable Amazon Tax Calculation Service. In addition, a valid PST (provincial) registration number must also be provided if the seller is to enable provincial tax calculation services for the provinces of British Columbia, Manitoba and Saskatchewan. For the Province of Quebec, a valid QST (Quebec) registration number is required.
Compared with other countries, Canada's tax is more complicated, which makes many sellers confused. Amber for everyone to organize the most comprehensive Canadian tax guide and difficult questions comb, let everyone see can quickly understand.
Canada implements the federal, provincial (or territorial)/local tax system. The provinces have relatively independent tax legislation power. The provincial tax legislation power cannot be contrary to the federal tax legislation power. Therefore, in Canada, the consumption tax to be paid is GST/HST, PST or QST. Let's take a look at each.
The two main categories of Canadian excise taxes
1. Federal Sales Tax (Goods and Services Tax) and HST (Harmonized Sales Tax)
GST refers to the national consumption tax levied by the Canadian government at a uniform rate of 5%. VAT is a tax levied on most goods and services used for domestic consumption. It is paid by consumers at the time of consumption, but ultimately paid by businesses to the government.
The HST, Uniform Sales tax is a combination of the GST and PST taxes, which are uniformly charged by the Federal Revenue Service at a rate of 13% or 15%, but only applicable in certain provinces: New Brunswick (NB), Newfoundland and Labrador (NL), Nova Scotia (NS), Prince Edward Island (PE), Ontario (ON).
2. Provincial Sales Tax PST (Provincial Sales Tax)
PST falls under the provincial sales tax. The merchant shall be responsible for collecting PST from the province where the consumer is located, which shall be collected by the provincial government tax bureau, and shall report to the provincial government and pay the corresponding tax. Currently, the PST rate is 7 percent in BC and MB, and 6 percent in SK.
In addition, under the Quebec Tax Code, sales in Quebec are subject to the Quebec Sales Tax (QST), which is 9.975%.
What are the provincial consumption tax rates in Canada?
As can be clearly seen from the table above, the consumption tax rate varies in each province, and the overall rate is between 5%-15%.
When do I need a tax registration number
The Canada Revenue Agency (CRA) has issued a new law for non-resident e-commerce platforms and sellers in Canada:
Starting July 1, 2021, all sellers (regardless of the registered address of the business) and e-commerce platforms who ship or receive goods in Canada are required to register a sales tax number (GST/HST), subject to whether sales revenue for the 12 months before or after this date (2021-7-1) exceeds the registration threshold of C $30,000;
Effective date and submission deadline for registration of GST/HST
1. If the registration threshold has been exceeded before 2021-7-1, the registration shall take effect after 2021-7-1, and the registration application shall be submitted within 30 days;
2. If sales revenue in Canada exceeds this registration threshold within 12 months after 2021-7-1, registration shall be effective on the date on which the threshold threshold is exceeded and shall be submitted within 30 days.
Pay attention
If you do not reach the registration threshold of voluntary registration, you can apply for cancellation of the tax number at least one year after registration.
What are the advantages of registering for a Canadian GST
According to the regulations of digital economy enterprises of Canada Tax Board, Amazon implements GST/HST+PST sales tax withholding for sellers who do not register GST/HST+PST sales tax number. Do I still need to register Canadian GST/HST+PST sales tax? Many sellers have these doubts.
Let's look at this in two ways:
1. If the sales volume in Canada is not large, Amazon can directly withhold GST/HST+PST;
2, however, if the sales in Canada is relatively large, the benefits of registering the Canadian consumer tax Number are more, listed as follows:
(1) Input tax credit (ITC) : When applying for GST, the seller can apply for the import and export number of Canada, and use the Canadian import and export tax number for customs clearance. When VAT declaration is made, the import GST consumption tax can be deducted. In addition, Amazon's FBA logistics and warehousing GST invoice can also be used for input tax deduction.
(2) Independent GST/HST declaration: When the seller has its own Canadian GST/HST tax number, it can collect the consumer's consumption tax on behalf of the seller. In the quarterly report/annual report declaration period, the seller can independently declare through the tax agent and pay the consumption tax offline. At this time, Amazon will no longer withhold and pay the consumption tax.
Such as belong to the annual report, then you can declare before April 30 of the next year to pay taxes can; If your first fiscal year estimated net tax is less than 3,000 Canadian dollars or estimated annual sales less than 100,000 Canadian dollars, in the registration of the sales tax number does not need to pay security, can also apply for the annual report, for the seller, equivalent to increased tax part of the cash flow;
(3) The seller has its own Canadian GST/HST tax number: it can issue sales tax invoice by itself, which is more credible for the seller with offline transaction.
Amber suggests that you decide whether to register for a Canadian GST/HST based on your sales.
How is the reporting period for Canada's excise tax determined
The declaration cycle, declaration and tax payment deadline of Canadian GST are determined based on the estimated annual sales in the first year or the annual sales in the previous year, and are divided into annual, quarterly and monthly declarations. Specific requirements are as follows:
The Canadian GST filing and payment deadline, quarterly or monthly filing is the last day of the following month; Annual tax returns are due by June 15th of the following year, and payments are due by April 30th of the following year. Note: Annual tax returns are due earlier than the filing time.
What about deposit with the Revenue Board?
At the time of Canadian GST/HST registration, a security deposit or tax advance is required to be made to the Canada Revenue Agency (Canada Revenue Board) based on estimated sales. The initial amount of the deposit is 50% of the estimated net tax within 12 months after registration, with a minimum deposit of C $5,000 and a maximum of C $1,000,000. And the deposit to the tax bureau can only be paid by bill of exchange.
However, there are two circumstances in which a deposit is not required:
1. Canadian sales are estimated to be less than C $100,000 per year;
2. Net tax less than C $3,000 per year.
If I register now, do I need to pay the previous tax?
According to digital economy business, Revenue Canada
Relevant provisions :
1. For the seller selling through the third-party sales platform, if the annual sales in Canada in the 12 months before 2021-7-1 exceed CAD 30,000, the taxable sales shall be calculated from 2021-7-1. If the third-party sales platform has withheld and paid the sales tax, there is no need to pay the tax during the withholding period. The seller shall declare and pay sales tax after applying for the GST/HST sales tax number and successfully binding to the sales platform.
2. For independent stations and sales platforms, if the annual sales revenue in Canada before or after 2021-7-1 does not reach the registration threshold (CAD 30,000), voluntary or reach the registration threshold and need to register GST/HST sales tax number, the tax will be paid from 2021-7-1 or the effective date of legal registration.
What are the common penalties in Canada's excise tax?
1. Declare the penalty for delay
Any return you file late will be subject to a penalty unless $0 is owed or the IRS owes you a refund.
The tax office calculates the penalties as follows:
a) 1 per cent of the amount owed;
b) Calculation result: 25% of the amount calculated by a × the number of whole months overdue (up to a maximum of 12 months)
2. Failing to declare a fine
If you receive a request to file and fail to do so, a $250 penalty will be charged. And you cannot claim an income tax deduction for paying a penalty for not filing a GST/HST return.
Canada Excise Tax certificate format
When Amber registers the Canadian GST/HST tax number for the seller, the following three numbers will be applied together:
1. BN number is BN+9 digits, such as BN123456789;
2, GST/HST number format 9 digits +RT0001,
Example: 123456789RT0001;
3. The format of import and export clearance number is 9-digit +RM0001.
Example: 123456789RM0001
With the fierce competition in the European and American markets and the rapid development of the Internet in Canada in recent years, the total turnover of the Canadian e-commerce market is expected to exceed 33 billion US dollars by 2024, according to the data of Statista.
So currently many sellers in deep cultivation in Canada.