This post is part of a series on my story incorporating in Canada.
After understanding what GST/HST is and whether you provide goods or services that qualify for it we have to consider a few more things regarding GST/HST:
- Do you make enough revenue in a year to obligate you to register for a GST/HST account.
- If you don’t, then should you voluntarily register?
Requirements for Mandatory Registration for a GST/HST Account
According to the “Register for a GST/HST account” page there are two requirements:
- you provide taxable property and services in Canada in the course of your commercial activity; and
- you no longer qualify as a small supplier.
We covered the first requirement in the previous post. What about the second:
What is a Small Supplier
The CRA Glossary provides the following definition:
A small supplier refers to a person whose revenue (along with the revenue of all persons associated with that person) from worldwide taxable supplies was equal to or less than $30,000 ($50,000 for public service bodies) in a calendar quarter and over the last four consecutive calendar quarters.
Charities and public institutions are also considered small suppliers if they meet the gross revenue test of $250,000 or less.
It’s important to note that they are talking about revenue and NOT profit. That means the total income money without the expenses.
So basically if you have over $30,000 coming in from worldwide taxable supplies in a year then you must register for a GST/HST account. If you are not making that much then you don’t have to but you can.
Should you Register if you are a Small Supplier (Voluntary Registration)?
Let’s take a look at the pros and cons.
Pros
- From the “Register for a GST/HST account” page: “you may be able to claim some input tax credits on the GST/HST paid and payable on your business purchases and expenses”
Cons
- You have to start charging customers GST/HST, which means the price of your goods or services may increase, which may have an effect on your business. You won’t be able to advertise that you offer your product/service tax free and get the same amount of profit.
- You have to file your GST/HST return, which means you have more accounting and bureaucracy to do.
- You have to pay your GST/HST, which means you have to disrupt your cash-flow.
Conclusion
Consider carefully whether the profit of the input tax credits on the GTS/HST paid and payable on your business purchases and expenses outweigh the possible loss in profit in sales because of the increase in price and increased accounting time.
How to Register
Once you have decided that you will register take a look at the “Register for a GST/HST account” page for all the different ways to register.
References
- The “Register for a GST/HST account” Page.
