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Before making a major financial decision you
should consult a qualified professional.
GST, or goods and services tax, is a
sales tax which is charged on most goods and services sold in Canada. In
many provinces, the GST has been
"harmonized" with the provincial sales tax, to become harmonized
sales tax, or HST. For information on sales tax rates in each province
and territory, see our tables of sales tax rates (link at bottom of page).
Any business which is registered to collect GST/HST will be
able to recover GST/HST paid on purchases made in the course of their
commercial activities, by claiming "input tax credits" when filing
their GST returns. Usually the input tax credits will be for 100% of the
GST or HST incurred on supplies for your commercial activities. Input tax
credits cannot be claimed if they relate to purchases made in order to provide
exempt supplies (see RC4022 at bottom). In most cases of GST or HST on
meals and entertainment expenses, only 50% of the GST/HST can be recovered, and
the other 50% is not a deductible expense. See the link at
bottom of page for more information.
When
is GST/HST Recorded?
Section 168(1) of the Excise Tax Act says, re GST/HST: "Tax under this Division in respect of a taxable supply is payable by the recipient on the earlier of the day the consideration for the supply is paid and the day the consideration for the supply becomes
due."
Thus, for both the seller and the buyer, normally the GST/HST is recorded on
the invoice date, or earlier if the invoice is paid prior to the invoice
date. In the case of a lease, it would be recorded on the due date of the
lease payment as per the lease agreement, unless the lease payment is paid prior
to the due date.
GST/HST on Forgiven or Deferred Commercial Rents
With the COVID-19 pandemic, some landlords may be forgiving or deferring
commercial rents for their tenants. GST/HST applies to commercial rents.
If rent is deferred to a later date, it should still be recorded by both the
landlord and the tenant on the due date indicated in the lease agreement,
including the GST/HST portion of the rent. It is a receivable for the
landlord and a payable for the tenant on the due date of the lease
payment. Although the GST/HST isn't being collected yet, the landlord
would still have to remit it, and the tenant can recover it based on the due
date. If the wording of the lease is revised to change payment amounts and
due dates, then the GST/HST would be recorded and remitted, and ITCs claimed,
based on the revised due dates.
If a landlord is forgiving the rent for their commercial tenant, this should
be put in writing to eliminate the need for recording and remitting the GST/HST.
GST/HST Rate Changes
Both Ontario and BC implemented the HST, effective July 1, 2010. Ontario's HST
rate is 13%, while BC's rate was 12%. However, BC returned to a PST
and GST system on April 1, 2013. See Ontario
HST and BC HST for more information.
Nova Scotia increased their HST rate to 15%, effective July
1, 2010. Canada Revenue Agency (CRA) has issued the following
publications:
The GST rate was reduced from 6% to 5%
effective January 1, 2008. The HST rate was reduced from 14% to 13%.
Since then, of course, other provinces have implemented HST - see the table of
sales tax rates in each province (above) for current rates. See the following CRA web pages regarding
the rate reduction:
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