General Information for GST/HST Registrants

RC4022(E) Rev. 12/2010

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Table of contents

• Is this guide for you?
• What's New?
• Definitions
• What is the GST/HST?
  • Who pays the GST/HST?
  • False GST/HST exemptions
  • Who charges the GST/HST?
• Taxable supplies
  • Supplies taxable at 5 %, 12 %, 13 %, or 15 %
  • Zero-rated supplies
• Exempt supplies
• How does GST/HST work?
• Should you register?
  • Small supplier
  • How to register
  • Fiscal year
  • Reporting periods
  • Accounting periods
• Making changes to your GST/HST account
  • Address changes
  • Telephone and fax number changes
  • Authorized representative or contact changes
  • Direct deposit changes
  • Legal entity type changes
  • Legal name changes
• Collecting the GST/HST
  • Informing your customers
  • Sales invoices for GST/HST registrants
  • Provincial sales tax
  • Rounding off fractional amounts
  • Early-payment discounts and late-payment surcharges
  • Volume discounts
• Input tax credits
  • Time limits for claiming ITCs
  • Recapture of ITCs
  • ITC restrictions
  • Claiming ITCs for capital property
  • Simplified Method for claiming ITCs
• Calculating your net tax
  • GST/HST charged and not collected
  • GST/HST not charged
  • GST/HST payable and not paid
  • Bad debt adjustments
• Quick Method of accounting
  • How does the Quick Method work?
  • How do I start using the Quick Method?
• GST/HST returns
  • Filing and remitting due dates
• How to file your return and remit any amount owing
  • Filing your return electronically
  • Date received
  • Direct deposit
  • Branches or divisions filing separate returns
  • Using a rebate or refund to decrease an amount owing on your GST/HST return
  • Filing nil returns
• After you file
  • Notices and statements
  • When can you expect your refund?
  • What interest do we pay on overpayments and refunds?
  • What penalty and interest do we charge?
  • How do you change a return?
  • What is the Voluntary Disclosures Program?
  • Director’s liability
  • What records should you keep?
  • If you are audited
• Instalment payments
  • Who has to make instalment payments?
  • Instalment payments following harmonization
  • Instalment interest
  • New registrants and instalments
  • Instalment due dates
  • How to make instalment payments
• Harmonized sales tax
  • Point-of-sale rebates
  • Ontario First Nations point-of-sale relief
  • HST registration
  • Tax on supplies of property and services made in participating provinces - Place-of-supply rules
  • Tax on property and services brought into a participating province
  • Rules for motor vehicles
• Coin-operated machines
• Coupons, rebates, gifts, and promotional allowances
  • Reimbursable coupons
  • Non-reimbursable coupons
  • Other coupons
  • Manufacturers’ rebates
  • Gift certificates
  • Promotional gifts and free samples
  • Promotional allowances
• Deposits and conditional sales
  • Deposits
  • Conditional and instalment sales
• Employees and partners
  • Employee benefits
  • Employee and partner GST/HST rebate
• Exports and imports
  • Exported goods
  • Exported services
  • Exported intangible personal property
  • Imported goods
  • Imported services and intangible personal property
• Financial services
• Insurance claims
  • Life and health insurance claims
  • Property and casualty insurance claims
• Real property
  • Sales of new housing
  • Who remits the tax for a taxable sale of real property - Vendor or purchaser?
  • Claiming ITCs for capital real property
  • Claiming ITCs for improvements to capital real property
  • Change-in-use rules for capital real property
  • Claiming ITCs when you make a taxable sale of real property
• Returns and warranties
  • Returnable beverage containers
  • Returnable containers
  • Returned goods
  • Warranty reimbursements
• Selling goods, services, and rights for others
  • Auctioneers
  • Agents
  • Consignment sales
  • Direct selling industry
• Supplies to diplomats, Indians, and governments
  • Diplomats
  • Federal government
  • Provincial and territorial governments
  • Municipalities
  • Indians
• Trade-ins
  • When the customer has to charge tax
  • When the customer does not have to charge tax
  • Sale-leaseback arrangements
  • Barter-exchange networks
• Selling your business
  • Will you have any more business activity?
• Cancelling your registration
  • Non-capital property held at the time of deregistration
  • Capital property held at the time of deregistration
  • ITCs for services, rent, royalties, and similar payments
  • Filing your final GST/HST return
• Instructions for completing your GST/HST return
  • GST/HST NETFILE and TELEFILE returns
  • Regular method
  • Quick method
  • Schedule A – Builders transitional information
  • Schedule B – Calculation of input tax credits
  • Schedule C – Reconciliation of recaptured imput tax credits (RITCS)
• Publications and forms
• For more information

Is this guide for you?

If you own or operate a business in Canada, you need to know about the goods and services tax (GST) and the harmonized sales tax (HST). This guide provides general information such as how to collect, record, calculate, and remit the GST/HST. It also includes line-by-line instructions to help you complete your GST/HST return.

GST/HST and Quebec

In Quebec, Revenu Québec administers the GST/HST. If the physical location of your business is in Quebec, you have to file your returns with Revenu Québec using its forms. For more information, see the Revenu Québec publication IN-203-V, General Information Concerning the QST and the GST/HST, available at Revenu Québec, or call 1-800-567-4692.

First Nations taxes

The First Nations goods and services tax (FNGST) is a tax that replaces the GST on the lands of First Nations that have imposed the FNGST.

The First Nations tax (FNT) is a tax on the sale of listed products on some First Nations reserves. The Canada Revenue Agency (CRA) administers the FNGST and the FNT on behalf of the First Nations. For more information see Guide RC4365, First Nations Goods and Services Tax (FNGST), and Guide RC4072, First Nations Tax (FNT).

What’s new?

We list the major changes below. This guide contains information based on amendments to the Excise Tax Act and Regulations. At the time of publication, some of these amendments were proposed and not law. The publication of this guide should not be taken as a statement by the Canada Revenue Agency that such amendments will in fact become law in their current form. If they become law as proposed, they will be effective as of the dates indicated. For more information on these and other changes, see the areas outlined in this guide.

Definitions

Basic tax content – of a property generally means the amount of the GST/HST that was payable for your last acquisition of the property, and for any improvements you made to the property since that last acquisition, less any amounts that you were, or would have been, entitled to recover (for example, by rebate or remission, but not by input tax credits). The calculation for the basic tax content also takes into account any depreciation in the value of the property since you last acquired it (for example, when you purchased it or were last considered to have purchased it, whichever occurred more recently).

You may have to calculate the basic tax content of a property if you are a registrant and you increase or decrease your use of the property in your commercial activities. For more information, see Calculating the basic tax content.

Calendar quarter – means a period of three consecutive calendar months ending on the last day of any of the following months: March, June, September, and December.

Calendar year – means a year that begins on January 1 and ends on December 31.

Charity – means a registered charity or registered Canadian amateur athletic association for income tax purposes, but does not include a public institution. A charity can issue official donation receipts for income tax purposes.

Commercial activity – means any business or adventure or concern in the nature of trade carried on by a person, but does not include:

• the making of exempt supplies; or
• any business or adventure or concern in the nature of trade carried on without a reasonable expectation of profit by an individual, a personal trust, or a partnership where all the members are individuals.

Commercial activity also includes a supply of real property, other than an exempt supply, made by any person, whether or not there is a reasonable expectation of profit, and anything done in the course of making the supply or in connection with the making of the supply.

Exempt supplies – are supplies of property and services that are not subject to the GST/HST. GST/HST registrants cannot claim input tax credits to recover the GST/HST paid or payable on expenses related to making such supplies.

Input tax credit (ITC) – means a credit GST/HST registrants can claim to recover the GST/HST paid or payable for property or services they acquired, imported into Canada, or brought into a participating province for use, consumption, or supply in the course of their commercial activities.

Municipality – means an incorporated city, town, village, metropolitan authority, township, district, county or rural municipality, or other incorporated municipal body however designated, and such other local authority as the Minister of National Revenue may determine to be a municipality.

Participating province – means the province of British Columbia, New Brunswick, Newfoundland and Labrador, Nova Scotia, or Ontario.

Person – means an individual, a partnership, a corporation, the estate of a deceased individual, a trust, or any organization such as a society, a union, a club, an association, or a commission.

Property – includes goods, real property and intangible personal property such as trademarks, rights to use a patent, and admissions to a place of amusement, but does not include money.

Public institution – means a registered charity for income tax purposes that is also a school authority, a public college, a university, a hospital authority or a local authority determined to be a municipality.

Public service body – means a charity, non-profit organization, municipality, university, public college, school authority, or hospital authority.

Real property – includes:

• a mobile home or floating home and any leasehold or ownership interest in such property;
• in Quebec, immovable property and every lease of such property; and
• in any other place in Canada, all land, buildings of a permanent nature, and any interest in real property.

Registrant – means a person that is registered or has to be registered for the GST/HST.

Small supplier – refers to a person whose revenue 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.

Supply – means the provision of property or a service in any way, including sale, transfer, barter, exchange, licence, rental, lease, gift, and disposition.

Taxable supplies – are supplies of property and services that are made in the course of a commercial activity and are subject to the GST/HST (including zero-rated supplies).

Zero-rated supplies – are supplies of property and services that are taxable at the rate of 0%. This means there is no GST/HST charged on these supplies, but GST/HST registrants can claim ITCs for the GST/HST paid or payable on purchases and expenses made to provide them.

What is the GST/HST?

The goods and services tax (GST) is a tax that applies to most supplies of goods and services made in Canada. The GST also applies to supplies of real property (for example, land, buildings and interests in such property) and intangible property such as trademarks, rights to use a patent, and digitized products downloaded from the Internet and paid for individually.

The participating provinces harmonized their provincial sales tax with the GST to implement the harmonized sales tax (HST) in those provinces. Generally, the HST applies to the same base of goods and services as the GST. In some participating provinces, there are point-of-sale rebates equivalent to the provincial part of the HST on certain designated items. For more information, see Point-of-sale rebates.

GST/HST registrants who make taxable supplies (other than zero-rated supplies) in the participating provinces collect tax at the applicable HST rate. (see the chart below). GST/HST registrants collect tax at the 5% GST rate on taxable supplies they make in the rest of Canada (other than zero-rated supplies). Special rules apply for determining the place-of-supply. For more information on the HST and the place of supply rules, see Harmonized sales tax.

GST/HST Rates
	Before July 1, 2010	On or after July 1, 2010
Ontario	GST at 5 %	HST at 13 %
British Columbia	GST at 5 %	HST at 12 %
Nova Scotia	HST at 13 %	HST at 15 %
New Brunswick	HST at 13 %	HST at 13 %
Newfoundland and Labrador	HST at 13 %	HST at 13 %
Territories and other provinces in Canada	GST at 5 %	GST at 5 %

Exception for certain sales of new housing
Special rules apply for determining the rate of the GST/HST that applies to the sale of new housing. For more information, see Sales of new housing.

Who pays the GST/HST?

Almost everyone has to pay the GST/HST on purchases of taxable supplies of goods and services (other than zero-rated supplies). The GST/HST also applies to most supplies of intangible personal property and certain supplies of real property. However, Indians and some groups and organizations, such as certain provincial and territorial governments, do not always pay the GST/HST on their purchases. For more information, see Supplies to diplomats, Indians, and governments.

False GST/HST exemptions

Some individuals, businesses, and organizations are falsely claiming to be exempt from paying the GST/HST. In some cases, they may even present a fake exemption card to avoid paying the tax on their purchases.

If you do not collect the GST/HST from someone who falsely claims to be exempt from paying the GST/HST, you still have to account for the tax you should have collected.

Some provinces exempt farmers, municipalities, and certain businesses from paying the provincial sales tax. However, these provincial exemptions do not apply to the GST/HST.

Who charges the GST/HST?

Generally, GST/HST registrants have to collect the GST/HST on all taxable (other than zero-rated) supplies of goods and services they provide to their customers. However, there are some exceptions for taxable sales of real property. For more information, see Real property.

Taxable supplies

Most property and services supplied in or imported into Canada are subject to the GST/HST.

Supplies taxable at 5%, 12%, 13%, or 15%

Examples of supplies taxable at 5%, 12%, 13%, or 15% include:

• sales of new housing (certain sales of new housing may be subject to a previous rate of GST/HST). For more information, see Sales of new housing;
• sales and rentals of commercial real property;
• sales and leases of automobiles;
• car repairs;
• soft drinks, candies, and potato chips;
• clothing and footwear;
• advertising (unless provided to a non-resident of Canada who is not registered for the GST/HST);
• taxi and limousine transportation;
• legal and accounting services;
• franchises;
• hotel accommodation; and
• barber and hairstylist services.

Zero-rated supplies

Some supplies are zero-rated under the GST/HST – that is, GST/HST applies at a rate of 0%. This means that you do not charge GST/HST on these supplies, but you may claim input tax credits for the GST/HST paid or payable on purchases and expenses made to provide these supplies. Examples of supplies taxable at 0% (zero-rated) include:

• basic groceries such as milk, bread, and vegetables;
• agricultural products such as grain, raw wool, and dried tobacco leaves;
• most farm livestock;
• most fishery products such as fish for human consumption;
• prescription drugs and drug-dispensing services;
• medical devices such as hearing aids and artificial teeth;
• exports (most goods and services for which you charge and collect the GST/HST in Canada, are zero-rated when exported); and
• many transportation services where the origin or destination is outside Canada.

For more information, see GST/HST Memoranda Series, Chapter 4, Zero-Rated Supplies.

Exempt supplies

Some supplies are exempt from the GST/HST–that is, no GST/HST applies to them. This means that you do not charge the GST/HST on these supplies of property and services, and you do not claim input tax credits.

Examples of exempt supplies include:

• a sale of housing that was last used by an individual as a place of residence;
• long-term rentals of residential accommodation (of one month or more) and residential condominium fees;
• most health, medical, and dental services performed by licensed physicians or dentists for medical reasons;
• child-care services, where the primary purpose is to provide care and supervision to children 14 years of age or under for periods of less than 24 hours per day;
• most domestic ferry services;
• legal aid services;
• many educational services such as:
  • courses supplied by a vocational school leading to a certificate or a diploma that certifies the ability of individuals to practise or perform a trade or a vocation, or
  • tutoring services made to an individual in a course that follows a curriculum designated by a school authority;
• music lessons;
• most services provided by financial institutions such as lending money or operating deposit accounts;
• the issuance of insurance policies by an insurer and the arranging for the issuance of insurance policies by insurance agents;
• most goods and services provided by charities and public institutions; and
• certain goods and services provided by non-profit organizations, governments, and public service bodies such as municipal transit services and standard residential services such as water distribution.

How does the GST/HST work?

If you are a GST/HST registrant, you have to charge and collect the GST/HST on taxable supplies (other than zero-rated supplies) you make in Canada and file regular GST/HST returns to report that tax.

Exception
In certain cases, you do not have to collect the GST/HST on a taxable sale of real property. Instead, the purchaser may have to pay the tax directly to us. For more information, see Real property.

You can claim ITCs on your GST/HST return to recover the GST/HST paid or payable on purchases and expenses you use, consume, or supply in your commercial activities.

For the consumer, there is no difference between zero-rated and exempt goods and services because tax is not collected in either case. However, the difference for you, as the registrant, is that although you do not collect the GST/HST on zero-rated or exempt goods and services, you can only claim ITCs for the GST/HST paid or payable on purchases used to make zero-rated supplies of goods and services.

Taxable and exempt goods and services

Taxable ↓ You charge the GST/HST ↓ You can claim ITCs

Exempt ↓ You do not charge the GST/HST ↓ You cannot claim ITCs

When you complete your GST/HST return, deduct your ITCs from the GST/HST you charged your customers. The result is your net tax.

If the total amount of tax you charged is more than the amount of your ITCs, send us the difference. If the total amount of tax you charged is less than the amount of your ITCs, you can claim a refund. For more information on ITCs, see Input tax credits.

Note
Special rules apply to charities. For more information, see Guide RC4082, GST/HST Information for Charities.

Should you register?

You have to register for the GST/HST if:

• you provide taxable supplies in Canada; and
• you are not a small supplier.

You do not have to register if:

• you are a small supplier (that does not carry on a taxi business);
• your only commercial activity is the sale of real property, other than in the course of a business . Although you do not have to register for the GST/HST in this case, your sale of real property may still be taxable and you may have to charge and collect the tax. For more information, see Real property; or
• you are a non-resident who does not carry on business in Canada (see Guide RC4027, Doing Business in Canada - GST/HST Information for Non-Residents).

If your business is registered for the GST, your business is also registered for the HST. For more information, see HST registration.

Small supplier

You are a small supplier and do not have to register if you meet one of the following conditions:

• you are a sole proprietor and your total revenues from taxable supplies (before expenses) from all of your businesses are $30,000 or less in the last four consecutive calendar quarters or in any single calendar quarter;
• you are a partnership or a corporation and your total revenues from taxable supplies (before expenses) are $30,000 or less in the last four consecutive calendar quarters or in any single calendar quarter; or
• you are a public service body (charity, non-profit organization, municipality, university, public college, school authority, or hospital authority) and your total revenues from taxable supplies from all of the activities of the organization are $50,000 or less in the last four consecutive calendar quarters or in any single calendar quarter. A gross revenue threshold of $250,000 also applies to charities and public institutions. For more information, see Guide RC4082, GST/HST Information for Charities.

Total revenues from taxable supplies means your worldwide revenues from your supplies of property and services that are subject to the GST/HST (including zero-rated supplies), or that would be subject to the tax if supplied in Canada. It does not include goodwill, financial services, and sales of capital property. You also have to include the total revenues from taxable supplies of all of your associates in this calculation.

Note
If your total revenues from taxable supplies are over $30,000 ($50,000 for public service bodies) in a single calendar quarter or over four consecutive calendar quarters, you are no longer a small supplier and you have to register for the GST/HST.

Exception
Taxi and limousine businesses and non-resident performers selling admissions to seminars, performances, and other events must register for the GST/HST, even if they are small suppliers.

Effective date of registration

The effective date of your GST/HST registration depends on when you go over the small supplier threshold amount of $30,000 ($50,000 if you are a public service body). If your revenues are over the threshold amount in one calendar quarter, you are considered a registrant and must collect the GST/HST on the supply that made you go over the threshold amount. Your effective date of registration is the day of the supply that made you go over the threshold amount. You have 29 days from this day to apply for registration.

Example
Zuly began her business on January 1, 2009. Her taxable sales during the first three calendar quarters ending September 30 were $25,000, meaning she was still a small supplier. In the quarter from October 1, 2009, to December 31, 2009, she had taxable sales of $40,000, which included an order on November 20 for $15,000 that pushed her sales above $30,000 for the quarter. That means Zuly was no longer a small supplier as of November 20 and she had to charge the GST/HST on the $15,000 sale and any taxable sale made after that. She has 29 days after that day to register for the GST/HST. Although she is considered to be a GST/HST registrant as of November 20, she has until December 19, 2009 to be registered.

If you are under the threshold amount in one calendar quarter, but you are over the threshold during four consecutive calendar quarters, you are considered to be a small supplier for those four calendar quarters and a month following those quarters. Your effective date of registration would be the day the first supply was made after you cease being a small supplier. You have 29 days from this day to register for the GST/HST.

Example
Using the previous example, Zuly had the same taxable sales, except for the November 20 sale. Her sales in the quarter ending December 31, 2009, were $25,000 (less than $30,000 for the quarter but more than $30,000 over the four quarters). She is a small supplier until January 31, 2010. Any taxable sale she makes on or after February 1, 2010, is subject to the GST/HST. She has until March 1, 2010, to register.

Voluntary registration

If you are a small supplier and you are engaged in a commercial activity in Canada, you can choose to register voluntarily, even though you do not have to. If you register voluntarily, you have to charge and remit the GST/HST on your taxable supplies of goods and services, and you can claim ITCs for the GST/HST paid or payable on purchases related to these supplies. You have to stay registered for at least one year before you can ask to cancel your registration. For more information, see Cancelling your registration.

If you choose not to register, you do not charge the GST/HST (other than on certain taxable supplies of real property), and you cannot claim ITCs.

How to register

Before you can register for a GST/HST account, you need a Business Number (BN). Your BN will be your business identification for all your dealings with us. For more information, see Booklet RC2, The Business Number and Your Canada Revenue Agency Program Accounts.

If you are incorporated, you may already have a BN and a corporate income tax account.

To set up a BN, a GST/HST account, and any other account you may need (for example, a payroll deduction or import account), go to Business Registration, call 1-800-959-5525, or send us a completed Form RC1, Request for a Business Number(BN).

Note
It is the person or business entity that registers for the GST/HST. For example, it is the partnership that registers and not each partner.

If the physical location of your business is in Quebec, contact Revenu Québec at 1-800-567-4692.

Fiscal year

Usually, your fiscal year for GST/HST purposes is the same as your tax year for income tax purposes. Generally, the tax year of the following persons is a calendar year:

• individuals and certain trusts;
• professional corporations that are members of a partnership (such as a corporation that is the professional practice of an accountant, a lawyer, or a doctor); and
• partnerships, where at least one member of the partnership is an individual, a professional corporation or another affected partnership.

However, some persons use non-calendar tax years. If you are a person described above that uses a non-calendar tax year approved by the CRA, you may want to use that same year as your GST/HST fiscal year.

A corporation generally uses its tax year for income tax purposes as its GST/HST fiscal year. However, if a corporation has a non-calendar tax year for income tax purposes, it can elect to use a calendar year as its GST/HST fiscal year.

If you are a corporation that uses a non calendar year for income tax purposes and you use the same non-calendar year for GST/HST purposes and you change to another non-calendar tax year for income tax purposes, inform us of the change and we will change your GST/HST fiscal year to match it.

How to change your fiscal year

To change your fiscal year, send us a completed Form GST70, Election, or Revocation of an Election, to Change a GST/HST Fiscal Year.

Reporting periods

Reporting periods are the periods of time for which you file your GST/HST returns. For each reporting period, you have to prepare and send us a GST/HST return showing the amount of the GST/HST you charged or collected from your customers and the amount of input tax credits you are claiming.

Your reporting period is based on the revenue from your total taxable supplies of property and services made in Canada in your previous reporting periods, including zero-rated supplies of property and services and those of your associates, if applicable. This is your reporting period threshold amount.

When calculating this amount, do not include revenue from:

• supplies made outside Canada;
• zero-rated exports of goods and services;
• zero-rated supplies of financial services;
• taxable sales of capital real property; and
• goodwill.

When you register for the GST/HST, we assign you the reporting period that requires you to file your GST/HST returns the least frequently. You may be able to choose, based on the amount of revenue from your taxable supplies from your previous fiscal year, an optional reporting period.

If you want to change your assigned reporting period, send us a completed Form GST20, Election for GST/HST Reporting Period, or call 1-800-959-5525.

To get forms, go to Forms and publications for GST/HST page or call 1-800-959-2221.

Assigned and optional reporting periods
Annual taxable supplies threshold amounts	Assigned reporting period	Optional reporting periods
$1,500,000 or less	Annual	Monthly, Quarterly
More than $1,500,000 up to $6,000,000	Quarterly	Monthly
More than $6,000,000	Monthly	Nil

When does your reporting period change?

If your threshold amount in the previous fiscal year was $1,500,000 or less and you have not elected to report more frequently, you will have an annual reporting period throughout the current fiscal year.

If your revenue from taxable supplies is more than $1,500,000 during the current fiscal year, you have to report more frequently beginning with the first fiscal quarter in the next fiscal year.

Example
ABC Corp is a registrant with an annual reporting period in 2009. During the 2009 fiscal year its sales were $4,000,000. It has to report quarterly beginning with the first quarter of its 2010 fiscal year.

If you have a quarterly reporting period and your revenue from taxable supplies is more than $6,000,000 during the previous fiscal quarters in the current fiscal year, you have to report monthly beginning with the first fiscal quarter after you went over the threshold amount.

Example
ABC Corp is a registrant with a quarterly reporting period in 2010. During the first three quarters of its 2010 fiscal year its sales were over the $6,000,000 threshold. It has to report monthly beginning with the final quarter of its 2010 fiscal year.

We assign an annual reporting period to most listed financial institutions. They can choose to file monthly or quarterly GST/HST returns using Form GST20.

We assign annual reporting periods to charities, regardless of their revenues. They can choose to file monthly or quarterly returns using Form GST20. For more information, see Guide RC4082, GST/HST Information for Charities.

Accounting periods

If your business uses accounting periods other than calendar months or quarters, you have to notify us of the periods you have chosen. For example, if your business uses an exact 52-week fiscal period, the date of your fiscal year-end will differ from year to year.

Usually, your accounting periods have to meet the following guidelines:

• Each fiscal month has to be shorter than 36 days and, except for the first and the last month in a fiscal quarter, longer than 27 days. You can apply to us to have one fiscal month per quarter that is longer than 35 days. You can also apply to have fiscal months, other than the first or last month of the quarter, that are shorter than 28 days.
• A fiscal quarter has to be shorter than 120 days and, except for the first and last fiscal quarters in the fiscal year, longer than 83 days.

If your business is using accounting periods other than calendar months or quarters, or if you want to use fiscal months that do not meet the guidelines, complete and send us Form GST71, Notification of Accounting Periods, or send us a written request before the first day of each fiscal year to which it relates.

If you do not notify us of your accounting periods, we will assign calendar months and calendar quarters, and you will have to wait until your next fiscal year to have the option to choose your accounting periods.

Making changes to your GST/HST account

Address changes

You can view the address we have on file for the physical location of your business, your mailing address, and your books and records in My Business Account.

If your business or mailing address changes, you can update it by sending a request by mail or fax to your tax services office, or by calling 1-800-959-5525.

Your business address is the actual physical location of your business. If a street address is not available, use the legal description of the location of the business (for example, Lot 1, Concession 2).

Your mailing address can be different from your business address. For example, you may have a post office box or you might have your business mail delivered to your home or to your accountant instead of to your place of business.

You can have a different mailing address for each of your registered business accounts. For example, the mailing addresses for your GST/HST account, corporate income tax account, and payroll account can all be different.

You can stop the CRA from sending paper statements or the return envelope that accompanies a remittance voucher by going to My Business Account.

Telephone and fax number changes

If the telephone or fax numbers change for any owners, contacts, or representatives of the business, call 1-800-959-5525.

Authorized representative or contact changes

An authorized representative is usually a third party, such as an accountant, bookkeeper, or lawyer, who is not an owner or employee of a business, but represents it. You can add, change, or cancel the authorized representative named on your GST/HST account online by using My Business Account or by sending a completed Form RC59, Business Consent Form, or a letter that provides the same information to your tax centre.

You can add, change, or cancel your authorized representative through My Business Account or by writing to your tax centre. You can also cancel a representative by calling 1-800-959-5525.

A contact for a business is usually the owner or an employee of the business. If you want to add, change, or cancel the contact person named on your GST/HST account, you can update it online through My Business Account, by calling 1-800-959-5525, or by sending a letter to your tax centre.

Direct deposit changes

To start direct deposit or to change your direct deposit information, complete and send Form GST469, Direct Deposit Request (Non-Personalized). The information you provide will stay in effect until you request another change by sending us another Form GST469 or until you cancel your direct deposit. To get Form GST469, go to Direct deposit or call 1-800-959-2221.

You can view your direct deposit information online through My Business Account.

You can cancel your direct deposit using Form GST469 or by calling 1-800-959-5525. This is the only change we can make to your direct deposit information over the telephone.

Legal entity type changes

If the legal status of your business ownership changes, you have to get a new BN with a new GST/HST account for the new legal entity (for example, when a business changes from a sole proprietorship to a partnership, two or more businesses amalgamate, or a partnership changes to a corporation). For more information, call 1-800-959-5525.

Legal name changes

If you change the legal name of your business, notify us and send us the proper documents showing the name change. For example, the legal name of your business may change if you are:

• a sole proprietor whose own personal legal name changes;
• a partnership that takes on a new partner or loses a partner; or
• a corporation that changes its legal name and receives articles of amendment to show this change.

For more information, call 1-800-959-5525.

Collecting the GST/HST

As a GST/HST registrant, you are responsible for collecting the GST/HST when you make taxable supplies (other than zero-rated supplies) of goods and services in Canada. You hold this tax in trust until you send it to us.

Exception
In certain cases, you do not have to collect the GST/HST on a taxable sale of real property. Instead, the purchaser may have to pay the tax directly to us. For more information, see Real property.

Informing your customers

You have to let your customers know if the GST/HST is being applied to their purchases. For taxable supplies (other than zero-rated supplies), you have to show:

• that the total amount paid or payable for a supply includes the GST/HST;
• the amount paid or payable for the supply; and show the amount of the GST/HST payable on the supply separately; or
• the GST/HST rate that applies to the supply. If HST applies to the supply, show the total HST rate. Do not show the federal and provincial parts of the HST separately.

You can use cash register receipts, invoices, or contracts to inform your customers or you can post signs at your place of business.

Sales invoices for GST/HST registrants

In addition to the general rules described above, you have to give customers who are GST/HST registrants specific information on the invoices, receipts, contracts, or other business papers that you use when you supply taxable goods and services. They need this information to support their claims for ITCs or rebates for the GST/HST you charged. Similarly, when you make business purchases, the invoices from your suppliers will support your claims for ITCs. If your customers ask you for an invoice or receipt so they can claim  ITCs, you have to give them specific information, depending on the amount of the sale. For details of the information required, see the following chart:

Information required	Total sale under $30	Total sale of $30 to $149.99	Total sale of $150 or more
Your business or trading name or your intermediary's name
The invoice date or, if you do not issue an invoice, the date on which the GST/HST is paid or payable
The total amount paid or payable
An indication of the total amount of the GST/HST charged or that the amount paid or payable for each taxable supply (other than zero-rated supplies) includes the GST/HST at the applicable rate
When you supply items taxable at the GST rate and one of the HST rates, an indication of which items are taxed at the GST rate and which are taxed at the applicable HST rate
Your Business Number or your intermediary's Business Number
The buyer's name or trading name or the name of the buyer's duly authorized agent or representative
A brief description of the goods or services
The terms of payment
* An intermediary is a registrant who, under an agreement with you, makes a supply on your behalf, or causes or facilitates the making of the supply by you .

Disclosing the HST on sales subject to the point-of-sale rebates, or the Ontario First Nations point-of-sale relief

When disclosing the HST on an invoice or receipt issued for a sale of a designated item that you have paid or credited a rebate amount for the provincial part of the HST at the point of sale, you may show:

• the total amount of the HST payable or the total HST rate;
• the total HST payable as an amount net of the rebate amount paid or credited; or
• the total price of the qualifying item that includes HST at a net rate of 5%.

Under proposed changes, you may also use these options to disclose the HST on an invoice or receipt issued for a sale of qualifying property or service on which you have paid or credited an amount for the Ontario First Nations point-of-sale relief.

For more information, see Point-of-sale rebates and Ontario First Nations point-of-sale relief.

Provincial sales tax

When you have to charge the GST and the provincial sales tax (PST), calculate the GST on the price excluding the PST. For more information on how to calculate the PST, contact your provincial sales tax office. In the participating provinces, the HST includes both the federal and provincial parts.

Rounding off fractional amounts

Round off the GST/HST to the nearest cent:

• If the amount is less than half a cent, round down.
• If the amount is equal to or more than half a cent, round up.

If your customer is buying more than one item and tax applies at the same rate on all items, you can total the prices of all taxable supplies of goods and services, calculate the GST/HST payable, and then round off the amount.

Early-payment discounts and late-payment surcharges

Early-payment discounts

If you offer an early-payment discount on credit sales, you have to charge the GST/HST on the full invoice amount even if your customer takes the discount.

When you invoice an amount that is already net of the early payment discount, charge the GST/HST on the invoiced amount.

Late-payment surcharges

If you charge late-payment surcharges, you do not charge the GST/HST on the surcharge. GST/HST is payable only on the original invoiced amount.

Volume discounts

When you offer volume discounts to reduce the sale price, you can reduce the GST/HST payable. If you reduce the price if your customer buys a certain quantity of goods, the amount of the GST/HST you charge depends on whether you offer the discount at the time you make the sale or after you make the sale.

At the time of sale

If you offer a discount at the time of sale, you collect the GST/HST on the net amount (the sale price less the discount). The following sample invoice shows how to treat a volume discount at the time of sale.

Dodd Company 123 ABC Street Edmonton AB  T0K 2B2 Sold To: Flint Company Date: January 25, 2010 Business Number: 123456789 Description    Amount Net amount 10 tables @ $150.00 ea. $1,500     Volume discount (10%) (150) $1,350.00 40 chairs @ $50.00 ea. 2,000    Volume discount (10%) (200)  1,800.00 Lamp 75 75.00 Subtotal   $3,225.00 GST ($3,225 × 5%)   161.25 Total   $3,386.25

After the sale

Some businesses give volume discounts after they make the sale. The customer usually earns this type of volume discount over a period of time (for example, over a period of one year and not on a sale by sale basis). In this case, you have to choose whether to credit the GST/HST related to the amount of the discount.

If you adjust, refund, or credit the GST/HST for the volume discount amount, you have to issue a credit note to the customer to explain the adjustment, which is the discount and the related amount of the GST/HST. Alternatively, the customer can issue a debit note to you to indicate the adjustment. Treat credit or debit notes for this purpose the same way as you treat credit or debit notes for returned goods. For more information, see Returned goods.

You can deduct the amount of the GST/HST you adjust, refund, or credit to the customer if you included this amount in your net tax calculation for a previous reporting period. Your customer will have to repay any rebate claimed or add the amount of the GST/HST adjustment to their net tax if an ITC or rebate was previously claimed for the amount.

Example
Alberta Clothiers offers a 4% discount at the end of the year for customers that buy more than $20,000 in goods. East End Fashions buys $36,500 in goods from Alberta Clothiers during 2009. In January 2010, Alberta Clothiers credits East End Fashions $1,533 ($1,460 plus $73 GST) and it issues a credit note. Alberta Clothiers already included the GST charged on its supplies to East End Fashions in its net tax calculation, so it can include the $73 as an adjustment to its ITCs. Since East End Fashions already claimed ITCs for the amount, it has to include the $73 in its net tax calculation.

If you do not adjust the amount of the GST/HST you charged, you do not have to adjust your net tax calculation. This is sometimes done when the customer is a GST/HST registrant and has already claimed an ITC. Any price reduction you make does not include a refund, adjustment, or credit of the GST/HST, and neither you nor the customer has to issue a credit or debit note for GST/HST purposes or make any adjustment on your GST/HST return.

Example
Using the above example, East End Fashions, a GST/HST registrant, informs Alberta Clothiers that it already claimed an ITC for its 2009 purchases. Alberta Clothiers credits it $1,460, ignoring the GST. It does not have to issue a credit note and neither company will make an adjustment in its net tax calculation.

Input tax credits

As a registrant, you recover the GST/HST paid or payable on your purchases and expenses related to your commercial activities by claiming an input tax credit (ITC) on line 106 of your GST/HST return.

You can claim ITCs only to the extent that your purchases and expenses are for consumption, use, or supply in your commercial activities

There are some purchases and expenses for which you cannot claim an ITC, such as:

• certain capital property (for more information, see Claiming ITCs for capital property and Claiming ITCs for capital real property;
• taxable supplies of goods and services bought or imported to make exempt supplies of goods and services;
• membership fees or dues to any club whose main purpose is to provide recreation, dining, or sporting facilities (including fitness clubs, golf clubs, and hunting and fishing clubs), unless you acquire the memberships to resell in the course of your business; and
• goods or services you bought or imported for your personal consumption, use, or enjoyment.

To claim an ITC, the expenses or purchases must be reasonable in quality, nature, and cost in relation to the nature of your business.

Note
You can claim an ITC for the HST you pay when you buy goods and services in a participating province to use in your commercial activities, even if your business is not located in a participating province.

If you are a new registrant, you may be able to claim an ITC for the GST/HST paid or payable on property such as capital property and inventory that you have on hand on the day you register. For more information, see New registrants.

Note
Charities are limited in the ITCs that they can claim because of the special calculation method called the net tax calculation for charities that they must use to complete their GST/HST returns. For more information, see Guide RC4082, GST/HST Information for Charities.

Time limits for claiming ITCs

Most registrants claim their ITCs when they file their GST/HST return for the reporting period in which they made their purchases. However, you may have ITCs that you did not claim when you filed the return for the corresponding reporting period.

If so, you can claim those ITCs on a future GST/HST return as long as it is filed by the due date of the return for the last reporting period that ends within four years after the end of the reporting period in which the ITC could have first been claimed.

To support your claim for ITCs, the invoices or receipts you use must contain specific information. See the chart for details on what is required.

The time limit for claiming ITCs is reduced to two years for:

• listed financial institutions (other than a corporation that is deemed to be a financial institution because it has made an election to have certain supplies deemed to be financial services and that election is in effect); and
• persons with annual revenues from taxable supplies of goods and services of more than $6 million for each of the two preceding fiscal years.

However, the two-year time limit does not apply to the following persons even if they fall into the second category above (these persons have four years to claim their ITCs):

• charities; and
• persons whose supplies of goods and services (other than financial services) during either of the two preceding fiscal years are at least 90% taxable supplies.

Under the two-year limit, you can claim your ITCs on any future return that is filed by the due date of the return for the last reporting period that ends within two years after the end of your fiscal year that includes the reporting period in which the ITC could have first been claimed.

Example
You are a monthly filer with a fiscal year end of December 31. You buy goods in the reporting period September 1 to 30, 2009, for which you can claim an ITC. The fiscal year that includes the September 2009 return ends on December 31, 2009. You can claim the ITC on any subsequent return for a reporting period that ends by December 31, 2011 and is filed by January 31, 2012.

To simplify compliance, an election is available that would allow a large business to estimate the amount of recaptured ITCs in its monthly or quarterly reporting period and reconcile any differences between the amounts reported during the year and the actual amounts at year-end, using Schedule C, Reconciliation of Recaptured Input Tax Credits (RITCs), within 3 months of the year end. However, for 2011 only, Schedule C cannot be completed or filed until April 2011.

For more information, see Form RC4531, Election or Revocation of an Election to use the Estimation and Reconciliation Method to Report the Recapture of Input Tax Credits.

Recapturing ITCs is a temporary measure. The rate of recapture will be 100% for five years, from July 1, 2010, until June 30, 2015. The rate of recapture will then be gradually reduced during a three year phase out period with the rate of 0% applying after June 30, 2018.

For more information on the recapture of ITCs, see GST/HST Technical Information Bulletin B-104, Harmonized Sales Tax -Temporary Recapture of Input Tax Credits in Ontario and British Columbia.

ITC restrictions

In certain situations there are restrictions on the amount that you can claim as an ITC. These restrictions depend on the type and nature of the expense. This section explains the restrictions on claiming ITCs for different types of expenses.

Operating expenses

Examples of operating expenses for which you can claim an ITC are:

• commercial rents;
• equipment rentals;
• advertising;
• utilities; and
• office supplies (such as postage, computer disks, paper, and pens).

If you intend to use at least 90% of an operating expense for your commercial activities, you can claim a full ITC for the GST/HST you pay on that expense.

If you intend to use at least 90% of an operating expense for an exempt activity, you cannot claim an ITC for any of the GST/HST you pay on that expense.

Exception
Financial institutions must use 100% of an expense in commercial activities before they can claim a full ITC. However, they can claim a partial ITC even when they use less than 10% of an expense in commercial activities.

If you make both taxable and exempt supplies and you cannot allocate at least 90% of an expense to a commercial or exempt activity, you can only claim ITCs for the part of the expense you use in your commercial activities.

The method you use to determine the percentage of operating expenses you use in your commercial activities has to be fair and reasonable and it has to be used consistently throughout the year. For example, a method commonly used is the number of square metres of space used in commercial activities as a percentage of the total space of the building.

Procurement cards

Procurement cards or purchasing cards are charge cards with pre-set spending limits. These cards allow your employees to make business purchases more efficiently than through the normal purchase order or invoice cycle.

The statements and reports provided by the procurement card issuers might not provide enough information about your purchases to support your claim for ITCs.

Provided certain conditions are met, eligible registrants can apply to the CRA to use ratios to claim ITCs for individual purchases under $1,000 made using procurement cards.

For more information, see Notice 199, Procurement cards-Documentary requirements for claiming input tax credits.

Meal and entertainment expenses

You can claim an ITC for the GST/HST you pay on reasonable meal and entertainment expenses that relate to your commercial activities. When the deduction for income tax purposes is limited to 50% of the cost of meals and entertainment, 50% of the GST/HST you pay on those expenses qualifies for an ITC.

Note
The above rule does not apply to charities or public institutions. These persons may be able to claim a 100% ITC for the GST/HST they pay on eligible meal and entertainment expenses that relate to their commercial activities. For more information, call 1-800-959-5525.

You can choose one of the following two ways to calculate your ITCs for meal and entertainment expenses:

• You can claim 100% ITCs for these expenses throughout your fiscal year. If you file monthly or quarterly GST/HST returns, add the 50% adjustment for the excess ITCs you claimed during the year to your net tax calculation for the first reporting period of your next fiscal year. If you file annually, add the 50% adjustment to your net tax calculation for that fiscal year. Enter the adjustment on line 104 of your return (or include it in your line 105 calculation if you are filing electronically).
• You can claim 50% of the actual GST/HST you pay on these expenses during each reporting period. By choosing this method, you do not have to make any adjustments at the end of your fiscal year.

You can claim an ITC for the GST/HST you reimburse to your employees and partners for meal and entertainment expenses they incurred in Canada. However, these expenses are also subject to the 50% limit.

Large businesses may be subject to RITCs on 50% of the provincial part of ITCs allowed for meals and entertainment expenses. See Recapture of ITCs.

Long-haul truck drivers

For long-haul truck drivers, the allowable ITC limits for tax paid on food and beverage expenses have been increased. The following chart shows the ITC limit for each year.

If you are a quarterly or monthly filer and you decide to claim a 100% ITC for these expenses throughout the year, you have to make an adjustment for the excess ITCs you claimed during the year in your first reporting period of your next fiscal year.

Enter the adjustment on line 104 of your return.

Employee, partner, and volunteer expenses

Reimbursements

You can generally claim ITCs for the GST/HST included in reimbursements you pay to your employees or the partners in your partnership for expenses they incurred in Canada on your behalf for your commercial activities.

If you are a charity or public institution, you may also be able to claim ITCs for the GST/HST included in reimbursements you pay to your volunteers for expenses incurred on your behalf that relate to your commercial activities.

Note
Different rates and rules apply for claiming ITCs on reimbursements you paid to your employees or partners (or volunteers if you are a charity or a public institution) before 2008. If you paid a reimbursement before 2008, see GST/HST Info Sheet GI 039, Applying the 2008 GST/HST Rate Reduction to Allowances and Reimbursements.

You can choose one of the following methods to calculate your ITCs.

Method 1

Calculate an ITC for a reimbursement you paid as follows:

• if the GST was charged on 90% or more of the total amount you reimbursed for expenses, multiply by 4/104; or
• if the HST was charged on 90% or more of the total amount you reimbursed for expenses, multiply by:
  • 11/111 in British Columbia;
  • 14/114 in Nova Scotia; or
  • 12/112 in the remaining participating provinces.

Method 2

Determine the actual GST or HST you incurred on reimbursed expenses using the following formula:

A × B

A is the GST/HST paid by the employee, partner, or volunteer on the goods or services; and

B is the lesser of the following:

• the percentage of the cost to the employee, partner, or volunteer that you reimburse (reimbursement divided by cost); and
• the extent to which the employee, partner, or volunteer acquired, imported, or brought into a participating province the goods or services for consumption or use in relation to your commercial activities.

 

The method you choose to calculate your ITCs for reimbursements must be used consistently throughout your fiscal year. For example, if you use method 1 to calculate your ITCs for meal and entertainment expenses reimbursed to one employee, you have to use the same method to calculate your ITCs for the same types of reimbursements to all of your employees.

Allowances

Generally, you are considered to have paid the GST/HST on a reasonable allowance you pay to your employees or partners (or volunteers if you are a charity or a public institution) if you meet all of the following conditions:

• The allowance is used to pay GST/HST-taxable (other than zero-rated) expenses and at least 90% of the expenses are incurred in Canada, or the allowance is for the use of a motor vehicle in Canada.
• The allowance is or would be deductible for income tax purposes.
• The expenses incurred by your employees, partners, or volunteers would have been eligible for ITCs if you had incurred them.

To calculate the amount of GST or HST that you are considered to have paid on a reasonable allowance. Multiply the allowance by:

• 15/115 if 90% or more of the expenses were subject to the HST in Nova Scotia, or the allowance was for a motor vehicle used 90% or more in Nova Scotia;
• 12/112 if 90% or more of the expenses were subject to the HST in British Columbia, or the allowance was for a motor vehicle used 90% or more in British Columbia;
• 13/113 if 90% or more of the expenses were subject to the HST in one of the remaining participating provinces, or the allowance was for a motor vehicle used 90% or more in one of the remaining participating provinces;
• the lowest tax fraction (12/112, 13/113) if 90% of the expenses were subject to the HST in two or more participating provinces, or the allowance was for a motor vehicle used 90% or more in two or more participating provinces; or
• 5/105 in all other cases.

Note
If you paid a reasonable allowance before 2008, see GST/HST Info Sheet GI 039.

A motor-vehicle allowance that is reasonable for income tax purposes also qualifies as a reasonable allowance for GST/HST purposes.

To claim your ITC, multiply the amount of GST/HST that you are considered to have paid on the allowance by the percentage use of the allowance in your commercial activities.

Restriction – No ITCs on allowances and reimbursements paid for designated items subject to the point-of-sale rebates

You cannot claim an ITC for any part of an allowance or a reimbursement paid for a designated item, such as motor fuel purchased in British Columbia, that is subject to the point-of-sale rebate for the provincial part of the HST. For information on designated items, see Point-of-sale rebates.

Home office expenses

You can claim ITCs for your home office expenses only if the work space is:

• your principal place of business; or
• used 90% or more to earn income from your business and used on a regular and continuous basis for meeting your clients, customers, or patients.

This restriction for home office expenses is similar to that used for income tax purposes. For more information, see Interpretation Bulletin IT 514, Work Space in Home Expenses.

New registrants

If you are a new registrant, you can claim an ITC for the GST/HST paid or payable on property such as capital property, real property, and inventory that you had on hand to use in your commercial activities at the time you became a registrant. We consider that you bought the property at that time and paid GST/HST equal to the basic tax content of the property. For more information, see Change-in-use rules for capital personal property.

You can also claim an ITC for any GST/HST you prepaid for rent, royalties, or similar payments that relate to the period after you became a registrant. You cannot claim an ITC for the GST/HST paid or payable on services or accommodation you consumed, used, or supplied during a period before you became a registrant, even if you paid that GST/HST after you became a registrant.

Example
You prepaid 3 months rent for office space for use in your commercial activities for the period January 1, 2010, to March 31, 2010. If you became a registrant on March 1, 2010, you can claim an ITC for the GST/HST you paid on rent for the month of March. You cannot claim an ITC for the GST/HST you paid for rent from January 1 to February 28 because that amount relates to the period before you became a registrant.

Claiming ITCs for capital property

Capital property, for GST/HST purposes, is based on the meaning of the term for income tax purposes and includes:

• depreciable property (property that is eligible for capital cost allowance for income tax purposes); and
• other property that would result in a capital gain or capital loss for income tax purposes if you disposed of it.

Generally, capital property is property you buy for investment purposes or to earn income. It may include:

• real property, such as land or a building (for more information, see Claiming ITCs for capital real property
• personal property such as equipment or machinery that you use in your business;
• photocopiers, computers, and cash registers;
• furniture and appliances used to furnish places such as offices, lobbies, and hotel rooms; and
• free standing refrigerators, ovens, and other large appliances. Built in appliances are fixtures that are usually considered to be part of real property.

Note
Capital property for GST/HST purposes does not include property described for income tax purposes in class 12 (such as chinaware, cutlery, and certain tableware), class 14 (certain patents, franchises, concessions, or licences for a limited period), or class 44 (a patent or a right to use patented information for a limited or unlimited period). You can claim ITCs for these items based on the rules for operating expenses.

Capital personal property

Primary use rule

The general rule, known as the primary use rule, for claiming ITCs for capital personal property such as computers, equipment, and office furniture is as follows:

• If you use the capital personal property primarily (more than 50%) in your commercial activities, you can claim a full ITC.
• If you use the capital personal property 50% or less in your commercial activities, you cannot claim an ITC.

Example
You bought a computer for $2,000 plus the GST/HST. You will use the computer 60% in your commercial activities and 40% for personal use. Since you will use the computer more than 50% in your commercial activities, you can claim an ITC for the full amount of the GST/HST you paid for the computer.

Note
The primary use rule also applies to public service bodies claiming ITCs for capital personal property.

Exception
Financial institutions have to claim their ITCs for capital property based on the actual percentage of their use of the property in commercial activities.

Passenger vehicles and aircraft

Corporations follow the primary use rule mentioned above to determine their ITCs for passenger vehicles and aircraft.

However, individuals and partnerships usually claim ITCs for passenger vehicles and aircraft based on the capital cost allowance (CCA) claimed for income tax purposes. If the use in commercial activities is 10% or less, you cannot claim any ITC. If the use in commercial activities is 90% or more, you can claim a full ITC.

You usually calculate your CCA for income tax purposes at the end of your fiscal year.

Once you have calculated your CCA, calculate your ITC by using one or more of the following formulas:

• CCA × 5/105, if you paid the GST on the purchase.
• The applicable formula if you paid the HST on the purchase:
  • CCA × 12/112 in British Columbia;
  • CCA × 15/115 in Nova Scotia; or
  • CCA × 13/113 in the remaining participating provinces.
• If you paid the provincial part of the HST after bringing the vehicle or aircraft into a participating province from another participating province that has a lower tax rate:
  • CCA × 3/103 into Nova Scotia from BC;
  • CCA × 2/102 into Nova Scotia from a participating province other than BC; or
  • CCA × 1/101 into a participating province other than Nova Scotia.
• If you paid the provincial part of the HST after bringing the vehicle or aircraft into a participating province from a non-participating province or importing it into Canada:
  • CCA × 7/107 in British Columbia;
  • CCA × 10/110 in Nova Scotia; or
  • CCA × 8/108 in the remaining participating provinces.

If your tax year ended before January 1, 2008, see the chart for the applicable rates.

Improvement to capital personal property

An improvement to capital personal property means any property or service supplied or goods imported to improve the capital personal property, to the extent that the price paid for those supplies is included in determining the adjusted cost base of the capital personal property for income tax purposes.

You can claim an ITC for the GST/HST paid or payable for the acquisition or importation of an improvement to such property, if you are using the capital personal property primarily (more than 50%) in your commercial activities.

If the improvement is to a passenger vehicle or aircraft, you can add the cost of the improvement to the adjusted cost base of the passenger vehicle or aircraft. You cannot include any amount for improvements to a passenger vehicle that will make the adjusted cost base exceed the capital cost limitation. The capital cost limitation is $30,000 plus GST/HST and PST.

Musical instruments

If you are an individual who is a registrant and you use a musical instrument for employment purposes or in a business carried on by a partnership of which you are a member, we consider you to be using that instrument in your commercial activities. You can follow the primary use rule for claiming ITCs for capital personal property.

Change-in-use rules for capital personal property

The use of capital personal property may change over time. You have to apply the change-in-use rules in the following situations:

• Your capital property that was used more than 50% in your commercial activities is now used 50% or less in your commercial activities.
• Your capital property that was used 50% or less in your commercial activities is now used more than 50% in your commercial activities.

In each situation, you have to determine the basic tax content of the property when the change occurs.

If you change the use from 50% or less in commercial activities to more than 50% in commercial activities, you can claim an ITC equal to the basic tax content. Generally, this means you can recover all or part of the GST/HST you paid when you bought the property and when you made any subsequent improvements to the property.

If you change the use from more than 50% in commercial activities to 50% or less in commercial activities, you have to remit an amount equal to the basic tax content. Generally, this means that you have to repay all or part of the GST/HST you claimed (or were entitled to claim) as an ITC when you bought the property and when you made any subsequent improvements to the property.

We have simplified the basic tax content formula to accommodate most registrants. However, it may not apply to some registrants such as selected listed financial institutions. For more information, call 1-800-959-5525.

Calculating the basic tax content

The basic tax content formula is as follows:

(A – B) × C

A	is the GST/HST payable for your last acquisition of the property and for subsequent improvements you made to the property;
B	is any rebate or refund you were entitled to claim (not including ITCs) for the GST/HST payable for your last acquisition of the property and for subsequent improvements you made to it; and
C	is the lesser of: 1; and the fair market value of the property at the time of the change-in-use divided by the total cost (not including the GST/HST) for your last acquisition of the property and for subsequent improvements you made to it.

Changing the use to more than 50% in commercial activities

When you buy capital personal property for use 50% or less in your commercial activities you cannot claim ITCs to recover the GST/HST paid or payable. However, if you later change the use of the property to more than 50% in your commercial activities, we consider you to have purchased the property and paid the GST/HST at that time. This means you can claim an ITC equal to the basic tax content of the property at that time.

Note
If you later change the use again and begin to use the property 50% or less in your commercial activities, you may have to pay all or part of the GST/HST that you claimed, or were entitled to claim, as an ITC. For more information, see Changing the use to 50% or less in commercial activities.

Changing the use to 50% or less in commercial activities

When you buy capital personal property for use more than 50% in your commercial activities, you can claim an ITC to recover the GST/HST you paid, or that was payable, on your purchase. However, if you change the use of the property from more than 50% in your commercial activities to 50% or less in your commercial activities, you are considered to have sold the property and to have collected the GST/HST on that subsequent sale.

This generally means that you have to repay all or part of the GST/HST you claimed, or were entitled to claim, as an ITC when you bought the property and when you made any improvements to it.

The tax you have to account for is equal to the basic tax content of the capital personal property at the time of the change-in-use and has to be included in your net tax calculation when you file your GST/HST return for the reporting period in which the change-in-use occurred.

Note
If you later change the use again and begin to use the property more than 50% in your commercial activities, you may be entitled to claim an ITC. For more information, see Changing the use to more than 50% in commercial activities.

 

Sale of capital personal property

If you sell capital personal property that was used more than 50% in your commercial activities, you have to charge the GST/HST on the sale. However, you do not charge the GST/HST on the sale if the property was used 50% or less in your commercial activities (see the chart below).

Special rules apply to municipalities. For more information, see Guide RC4049, GST/HST Information for Municipalities.

Capital real property

The rules for claiming ITCs for capital real property, such as a building, depend on whether you are a corporation, a partnership, an individual, a financial institution, or a public service body. For more information, see Real property.

Simplified Method for claiming ITCs

The Simplified Method for claiming ITCs is an alternative way for eligible registrants to calculate their ITCs.

When you use the Simplified Method, you do not have to show the GST/HST separately in your records. Instead, total the amount of your taxable purchases for which you can claim an ITC. You still have to keep the usual documents to support your ITC claims in case we ask to see them.

You can use the Simplified Method if your annual worldwide revenues from taxable goods and services (including those of your associates) are $500,000 or less in your last fiscal year.

Your total taxable supplies (including those of your associates) for all preceding fiscal quarters of the current fiscal year must also be $500,000 or less. These limits do not include goodwill, zero-rated financial services, or sales of capital real property.

Also, you must have $2 million or less in taxable purchases made in Canada in your last fiscal year to qualify to use this method. The $2 million purchase limit does not include zero-rated purchases, but it does include purchases imported into Canada or brought into a participating province.

In addition, if you are a public service body, you must be able to reasonably expect that your taxable purchases in the current fiscal year will not be more than $2 million.

Exception
Listed financial institutions cannot use the Simplified Method to calculate ITCs.

If you qualify, you can start using the Simplified Method at the beginning of a reporting period. You do not have to file any forms to use it. Once you decide to use this method, you have to use it for at least one year if you continue to qualify.

How does the Simplified Method work?

If you make purchases in both participating and non-participating provinces, you have to separate your taxable purchases based on the rate of GST/HST you paid.

You can use the Simplified Method to calculate ITCs only for purchases you use to provide taxable goods and services. If you use your purchases for personal use, or to provide both taxable and exempt goods and services, only the portion used for providing taxable goods and services can be included in the ITC calculation. If you use a purchase at least 90% of the time to provide taxable goods and services, you can include the total purchase price in your ITC calculation.

To calculate ITCs using the Simplified Method, follow these steps.

Step 1

Add up your ITC-eligible business expenses. When you make purchases in both participating and non-participating provinces, you have to separately add up your purchases that are taxed at 5%, 12%, 13% and 15%.

Note
If you are claiming ITCs for eligible expenses you incurred before 2008, you have to use the rate that was in effect at that time.

Include purchases of capital personal property and improvements to such property if you use the property more than 50% in your commercial activities. Your totals will include:

• the GST or the HST;
• non-refundable PST (only for GST-taxable purchases);
• taxes or duties on imported goods;
• reasonable tips;
• interest and penalty charges related to purchases taxable at the GST or the HST rate; and
• reimbursements paid to employees, partners, and volunteers for taxable expenses.

Do not include:

• expenses on which you have not paid the GST/HST such as employees' salaries, insurance payments, interest, exempt or zero-rated purchases, and purchases from a non-registrant;
• purchases you made outside Canada that are not subject to the GST/HST;
• real property purchases;
• refundable or rebatable PST;
• purchases for which you are not entitled to claim an ITC such as:
  • the part of any purchase that you use for personal use;
  • the part of any purchase that you use to provide exempt goods and services;
  • capital personal property that you do not use more than 50% in your commercial activities; and
  • the part of the cost of a passenger vehicle that is more than the capital cost limitation for income tax purposes (for more information, see the preceding chart);
• 50% of the meal and entertainment expenses (you can include 100% of the expenses and make the 50% adjustment at the end of your fiscal year). This does not apply to charities and public institutions (they can include 100% of the meal and entertainment expense with no adjustment);
• if you are a long-haul truck driver, the applicable percentage of food and beverage expenses for which you cannot claim an ITC. To find out the appropriate percentages, see Long-haul truck drivers (you can include 100% of the expenses and make the adjustment at the end of your fiscal year);
• if you are an individual or a partnership, passenger vehicles or aircraft you bought or imported that you will not use 90% or more in commercial activities (for more information, see the preceding chart); and
• amounts paid or payable in reporting periods before you started using the Simplified Method to calculate your ITCs.

Note
If you also use the Quick Method of accounting, only include business purchases for which you are entitled to claim ITCs, such as purchases of capital equipment.

Step 2

Multiply the amount(s) you calculated in Step 1 by:

• 5/105 for purchases on which you paid 5% GST;
• 12/112 for purchases on which you paid 12% HST;
• 13/113 for purchases on which you paid 13% HST; and
• 15/115 for purchases on which you paid 15% HST.

Note
If you are claiming ITCs for eligible expenses you incurred before 2008, the fractions you will use in Step 2 are 6/106 if you paid 6% GST, 7/107 if you paid 7% GST, 14/114 if you paid 14% HST, or 15/115 if you paid 15% HST.

Step 3

Add the following amounts, if they apply, to your ITC amount calculated in Step 2:

• ITCs you did not claim before you started using the Simplified Method, as long as the time limit for claiming them has not expired;
• ITCs for the GST/HST paid or payable on real property purchases (for more information, see Claiming ITCs for capital real property); and
• if you are an individual or a partnership, the ITC you can claim for a passenger vehicle or an aircraft used less than 90% in your commercial activities.

Enter this total on line 106 of your GST/HST return (or include it in your calculation for line 108 if you are filing electronically).

Calculating your net tax

You have to calculate your net tax for each GST/HST reporting period and report this on your GST/HST return. To do so, calculate:

• the GST/HST charged on your taxable supplies made during the reporting period; and
• the GST/HST paid and payable on your business purchases and expenses for which you can claim an ITC.

The difference between these two amounts, including any adjustments, is called your net tax. It is either your GST/HST remittance or your GST/HST refund. If you charged more GST/HST than the amount paid or payable, send us the difference. If your GST/HST paid or payable is more than you charged, you can claim a refund of the difference.

For most businesses, this calculation is straightforward. However, to help reduce paperwork and bookkeeping costs, most small businesses can use the Quick Method of accounting to calculate their GST/HST remittance. For more information, see Quick Method of accounting.

Note
Most charities have to use a special net tax calculation method for reporting the GST/HST they charge and for claiming ITCs. For more information, see Guide RC4082, GST/HST Information for Charities.

There is also a special calculation method for selected listed financial institutions to determine their net tax liability for the provincial part of the HST for a particular fiscal year. For more information, see Guide RC4050, GST/HST Information for Selected Listed Financial Institutions and the Department of Finance’s May 19, 2010, Backgrounder – Financial Institution Rules for the Harmonized Sales Tax (HST), and the June 30, 2010, Backgrounder – Harmonized Sales Tax Rules for Financial Institutions, Interment Rights and Streamlined Accounting Methods and draft Regulations Amending Various GST/HST Regulations, No. 2, available on their Web site.

Different simplified accounting methods are available for charities, qualifying non-profit organizations, and other public service bodies. For more information, see the following publications:

• Guide RC4049, GST/HST Information for Municipalities;
• Guide RC4081, GST/HST Information for Non-Profit Organizations;
• Guide RC4082, GST/HST Information for Charities; and
• Guide RC4247, The Special Quick Method of Accounting for Public Service Bodies.

GST/HST charged and not collected

You are liable for the GST/HST you charge on goods or services on the day you receive payment or the day the payment is due, whichever is earlier. We usually consider payment to be due on the date you issue an invoice or the date specified in an agreement, whichever comes first. If you issue an invoice before you receive the payment, you have to include the GST/HST charged on this invoice in the reporting period that includes the date of the invoice, even if you have not yet collected the tax. Include the GST/HST you charged for both paid and unpaid invoices on line 103 of your GST/HST return (or include it in your calculation for line 105 if you are filing electronically) for the reporting period in which you issued the invoices.

GST/HST not charged

If you are required to charge the GST/HST but did not charge it, you are still liable for the tax. You have to include the GST/HST that you should have charged in the reporting period during which you should have collected the tax.

GST/HST payable and not paid

When you calculate your ITCs, you can include the GST/HST for purchases and expenses for which you have been invoiced but not yet paid. This means that you can get a credit for the GST/HST you owe to your suppliers before you pay the invoice.

Bad debt adjustments

If you already included the GST/HST on a credit sale on your GST/HST return, you remitted any outstanding net tax, and that sale became in whole or in part a bad debt, you can recover the GST/HST as a tax adjustment on line 107 of your return (or include it in your line 108 calculation if you are filing electronically). To do this, the debt has to be written off as a bad debt in your records, and you have to deal with the person at arm's length.

Use the following formula to calculate the tax adjustment. This formula is based on the tax that was payable at the time of the supply.

A × (B ÷ C)

A	is the GST/HST payable on the sale;
B	is the total amount that remains unpaid for the supply that was written off as a bad debt, including the GST/HST and applicable PST; and
C	is the total amount of the sale, including the GST/HST and applicable PST.

You have to make the tax adjustment on a return filed within four years of the due date of the return for the reporting period in which you wrote off the bad debt.

Bad debt recovered

If you claimed a bad debt adjustment on line 107 and you later receive a payment towards that debt, you have to include the GST/HST part of that amount as an adjustment on line 104 of your GST/HST return for the reporting period in which the amount is recovered (or include it in your line 105 calculation if you are filing electronically).

Use the following formula to calculate this tax adjustment:

A × (B ÷ C)

A	is the amount of the bad debt you recovered;
B	is the GST/HST payable for the supply to which the bad debt relates; and
C	is the total amount of the sale, including the GST/HST and applicable PST.

Quick Method of accounting

The Quick Method of accounting is a simple way to calculate the GST/HST you have to remit. You can begin using this method if the annual worldwide revenue from your taxable supplies and those of your associates (including zero-rated supplies) is no more than $200,000 (including the GST/HST) in any four consecutive fiscal quarters over the last five fiscal quarters. The $200,000 limit does not include the following:

• supplies of financial services;
• sales of real property;
• sales of capital assets; and
• goodwill.

Certain businesses cannot use the Quick Method, including:

• accountants;
• bookkeepers;
• financial consultants;
• lawyers (or law offices);
• actuaries;
• notaries public;
• listed financial institutions;
• audit services; and
• tax return preparation services or tax consultants.

How does the Quick Method work?

With the Quick Method, you charge and collect the GST/ HST on taxable goods and services you supply to your customers in the usual way. But, to calculate the net GST/HST to remit, you multiply your taxable supplies including the GST and your taxable supplies including the HST made during the reporting period by the applicable Quick Method remittance rate(s).

The remittance rates depend on the following factors:

• whether you are in the service, retail, or manufacturing business;
• the province in which your permanent establishment is located; and
• the province where your supplies are made or your services are provided.

The remittance rates are less than the GST/HST rates of tax that you charge. This means that you remit only a part of the tax that you charge or collect. The part that is not remitted under this method is reported as income on your income tax return.

If you use this method, you have to continue using it for at least a year. There are other rules as well. 

For more information, see Guide RC4058, Quick Method of Accounting for GST/HST.

Input tax credits

You cannot claim input tax credits (ITCs) for your operating expenses if you use the Quick Method. The Quick Method remittance rates take into account the GST/HST you pay on these purchases and expenses. You do not have to keep track of the GST/HST paid or payable on your operating expenses (such as utilities, rent, and telephone expenses), meal and entertainment expenses, and inventory purchases. However, you still have to keep records of your purchases and expenses.

You can claim ITCs for certain purchases such as purchases of land and purchases for which you can claim a capital cost allowance for income tax purposes, such as computers, vehicles, and other large equipment and machinery.

How do I start using the Quick Method?

To start using the Quick Method, send us a completed Form GST74, Election and Revocation of an Election to Use the Quick Method of Accounting. To get forms, go to Forms and publications for GST/HST or call 1-800-959-2221.

You have to make this election before you can start filing your GST/HST returns using the Quick Method.

For instructions on how to complete your GST/HST return using the Quick Method, see Quick Method.

GST/HST returns

Unless you have filed a GST/HST return electronically, we will automatically send you Form GST34, Goods and Services Tax/Harmonized Sales Tax (GST/HST) Return for Registrants, which includes pre-printed information about your account.

Note
Form GST34 is two double-sided pages long. Use Part 1 as a working copy. Keep it for your records and send us the completed Part 2 ( the bottom of page 3).

Form GST34 is not available on our Web site as we can only provide it in a pre-printed format. If you do not get it within 15 working days of the end of your reporting period, or if you lose it, you can use Form GST62, Goods and Services Tax/Harmonized Sales Tax (GST/HST) Return (Non-personalized). This non-personalized form contains all of the same information as Form GST34, except you have to enter your personal data. Form GST62 is also not available on our Web site, but you can order it online at Getting forms and publications or by calling 1-800-959-2221.

Note
Form GST62 is one double-sided page. Use Part 1 on the top of the front page as a working copy. Keep it for your records. Detach and send us the completed Part 2 (the bottom of the page).

You still have to file your return by the due date even if you do not receive a personalized return (Form GST34) or if you lose that return.

For more information, see a sample of page 1 of Form GST34 and Instructions for completing your GST/HST return.

Note
If you are a non-resident, complete your GST/HST return in Canadian dollars and remit any amounts owing in Canadian dollars.

Filing and remitting due dates

Monthly and quarterly filers

If you have a monthly or quarterly reporting period, you have to file your GST/HST return and remit any amount owing no later than one month after the end of your reporting period.

Annual filers

If you have an annual reporting period, you usually have to file your return and remit any amount owing no later than three months after the end of your fiscal year.

As an annual filer, you may also have to pay quarterly instalments. If so, they are due no later than one month after the last day of each fiscal quarter. For more information, see Instalment payments.

Most registrants who are listed financial institutions with a fiscal year reporting period that begins after September 23, 2009, will file the return within six months after the end of the year instead of within three months. If the reporting period is monthly or quarterly, the listed financial institutions continue to file the return within one month after the end of the reporting period.

A person who is a selected listed financial institution with a fiscal month or fiscal quarter reporting period must file an interim return (GST34) for each period within one month after the end of the period, as well as file a final return (GST494) no later than six months (rather than three months) for reporting periods in any fiscal year that begins after September 23, 2009.

Selected listed financial institutions with a fiscal year reporting period only file a final return. For fiscal years that begin after September 23, 2009, the filing due date is six months after the end of the fiscal year instead of three months.

How to file your return and remit any amount owing

Depending on your situation, you may be required to use a specific method for filing your GST/HST return and remitting any amount owing or you may have different filing options.

Filing your return electronically

The Canada Revenue Agency (CRA) offers several electronic filing options for GST/HST registrants, as outlined below. In some cases you will be required to file electronically and in certain situations you have to use a specific electronic filing method.

If you have any rebate applications that relate to your GST/HST return that you are filing electronically, the rebate applications should be sent by mail no later than the day you file your electronic return to the following address:

Summerside Tax Centre
275 Pope Road
Summerside PE C1N 6A2

Electronic filing methods are described below. For payment options, see How to remit an amount owing for an electronically filed return.

If you are a selected listed financial institution, you cannot file your final return electronically. For more information, including how a selected listed financial institution should file its returns, see Guide RC4050, GST/HST Information for Selected Listed Financial Institutions, and Form GST 494, Goods and services Tax/Harmonized Sales Tax Final Return for Selected Listed Financial Institutions.

GST/HST NETFILE

To file your return electronically using GST/HST NETFILE, go to the "Ready to file" page on the CRA Web site and enter the required information, including your four-digit access code.

As of April 12, 2010, all GST/HST registrants whose account is administered by the CRA will receive a four-digit access code.

You have to file your GST/HST return for a reporting period using GST/HST NETFILE if, during the reporting period, you are:

• required to recapture input tax credits (ITCs) for the provincial part of the HST on certain inputs in Ontario and BC;
• a builder who makes a taxable sale of a grandparented housing unit in Ontario, BC, or Nova Scotia during the reporting period and the purchaser of the unit is not entitled to claim a GST/HST new housing rebate or a GST/HST new residential rental property rebate;
• a first reseller that, during the reporting period, made a taxable sale of a housing unit that was subject to the HST at 13% in Ontario, 12% in BC, or 15% in Nova Scotia, and you had purchased that housing unit on a grandparented basis from the original builder;
• required to account for the transitional tax adjustment amount in your net tax calculation for the reporting period; or
• a builder reporting a provincial transitional new housing rebate (either a rebate that you are entitled to claim or a rebate that is assigned to you by a purchaser who is entitled to claim the rebate).

For more information, see GST/HST Info Sheet, GI-099, Builders and Electronic Filing Requirements.

To use GST/HST NETFILE or for more information, go to Goods and services tax/harmonized sales tax (GST/HST) - netfile or to My Business Account.

GST/HST TELEFILE

To file your return electronically using GST/HST TELEFILE, call 1-800-959-2038 using your Touch-Tone telephone. An automated telephone process will prompt you to give your GST/HST information, including your four digit access code, using the phone keypad.

As of April 12, 2010, all GST/HST registrants whose account is administered by the CRA will receive a four-digit access code.

To use TELEFILE or for more information, go to Goods and services tax/harmonized sales tax (GST/HST)-telefile.

You cannot use TELEFILE if you are required to file your GST/HST return using only GST/HST NETFILE, as indicated in the previous section. For example, when you are required to recapture ITCs on the provincial part of the HST or you have information to report as a result of the transitional housing measures in Ontario, Nova Scotia, or BC. For more information, see GST/HST NETFILE.

Note
You may be required to file your return using GST/HST NETFILE or TELEFILE. For more information, see the previous section.

GST/HST Internet file transfer (GIFT)

This option allows you to file your return electronically using third party CRA certified accounting software.

For more information, go to GST/HST Internet File Transfer.

You cannot use this method if you are required to file your GST/HST return using GST/HST NETFILE or TELFILE, as indicated in the two previous sections, GST/HST NETFILE and GST/HST TELEFILE.

Electronic Data Interchange (EDI)

Returns and remittances can also be filed electronically through a participating financial institution. For more information, go to GST/HST EDI filing and remitting or contact your financial institution.

You cannot use this method if you are required to file your GST/HST return using GST/HST NETFILE or TELEFILE. For more information, see Mandatory electronic filing.

When can you choose to file electronically or use a paper GST/HST return?

You can file your return using any of the electronic filing methods mentioned in the previous sections (GST/HST NETFILE, GST/HST TELEFILE, GIFT, or EDI) if you are not required to use GST/HST NETFILE or TELEFILE as discussed in the previous sections. You can file your return by using a paper return only if you are not required to file electronically.

My Business Account

You can file your GST/HST return electronically through My Business Account without a Web access code. To do so, log in to My Business Account using your user ID and password. You can also view the status of your return, your account balance, and your transactions. For more information, go to My Business Account.

How to remit an amount owing for an electronically filed return

Pay electronically using the CRA’s My Payment option. My Payment allows individuals and businesses to make payments online, using the CRA Web site, from an account at a participating Canadian financial institution. For more information on this self-service option, go to My Payment.

You can also pay electronically using your financial institution’s Internet or telephone banking service.

If you choose not to pay electronically, you can use Form RC158, GST/HST NETFILE/TELEFILE Remittance Voucher, to remit an amount owing on a return that you file using GST/HST NETFILE or TELEFILE. Do not use the remittance part of your GST/HST return.

Form RC158 is not available on our Web site as we can only provide it in a pre-printed format. To order this personalized form, see section Ordering personalized remittance forms.

At your financial institution

If you are remitting an amount owing, you can take your return and remittance to your participating financial institution in Canada.

You cannot file your return at a financial institution if you are required to file your GST/HST return electronically (see Mandatory electronic filing) or if you are claiming a refund, filing a nil return, or offsetting an amount owing on the return by a rebate or refund.

In these cases, you have to use one of the other filing methods described in this section.

If you are paying at a financial institution and your return requires attached documentation, you will have to send us these documents separately.

By mail

You can mail your return and your remittance, if any, to the address shown on the GST/HST return.

Print your Business Number on your cheque and make it payable to the Receiver General. Do not send cash in the mail. To avoid processing delays, do not staple or attach receipts or other supporting documents to your return.

Note
If your GST/HST payment is $50,000 or more, you must pay electronically or at your financial institution.

You cannot mail your return and payment together if you are required to file your GST/HST return electronically. For more information, see Mandatory electronic filing.

Are you a sole proprietor with an annual reporting period?

If you are a sole proprietor with an annual reporting period and you use a calendar year, your return is due June 15, but your payment is due no later than April 30. You can choose to file your return together with your remittance by April 30. You can also choose to remit the amount owing by April 30 and file the return separately by June 15. Use the applicable form to remit any amount owing as follows:

• Unless you are required to file electronically, use Form GST34, Goods and Services Tax/Harmonized Sales Tax (GST/HST) Return for Registrants, if you remit the amount owing and file the return together by April 30. You can also use Form GST62, which is the non-personalized version of Form GST34.
• Pay online (if you have access to online banking at a participating financial institution) through My Payment or use Form RC177, GST/HST Balance Due Remittance Voucher to remit an amount owing by April 30 and file the return separately by June 15.

Form RC177 is not available on our Web site as we can only provide it in a pre-printed format. To order this personalized form, see Ordering personalized remittance form.

Date received

When a due date falls on a Saturday, a Sunday, or a public holiday, we consider your return and remittance to be on time if we receive them on the next business day.

We will charge a penalty if we do not receive your return on time, unless there is a nil balance or we owe you a refund on the return. We will also charge interest on any outstanding amounts you owe.

Returns

If you send your return by mail, we consider the date of the postmark to be the date we received it.

Payments and remittances

We do not consider that you have paid or remitted an amount you owe on a return until we or a participating financial institution actually receives it. To avoid interest charges on a late payment, make sure we receive any amount due by the appropriate due date.

If you make your remittance through an automated teller machine (ATM) at your participating financial institution, we do not consider that we have received your payment until the financial institution processes the ATM transaction. Allow sufficient time (generally two or three days) for the financial institution to process the payment and credit the Receiver General account.

For information on penalties and interest that may be imposed if the payment or remittance is late, see What penalty and interest do we charge.

Direct deposit

We can deposit your refunds or certain rebates directly into your bank account. If you want to use this option, complete and send us Form GST469, Direct Deposit Request (Non Personalized). For more information, see Direct deposit changes.

Branches or divisions filing separate returns

Although you have to register your business as a single entity, you can apply to have your branches or divisions file their own returns. To do this, use Form GST10, Application or Revocation of the Authorization to File Separate GST/HST Returns and Rebate Applications for Branches or Divisions.

To qualify, your branches or divisions have to be separately identified either by their location or by the nature of their activities, and separate records must be kept. The branches and divisions have to keep the same reporting periods as the head office.

Note
If you make this election and you are required to file electronically or you are required to file using a specific method, all of the branches or divisions identified in the election also have to file electronically.

Using a rebate or refund to decrease an amount owing on your GST/HST return

You can offset the net tax you owe on your GST/HST return with certain GST/HST rebates to which you are entitled. The application forms for these rebates contain a section where you choose to either send the rebate application to us directly or apply the rebate amount to the net tax on your GST/HST return on line 111. For more information on the types of rebates that can be applied to an amount owing on your GST/HST return, call  1-800-959-5525.

If you file your return and rebate application together, or if you file your return electronically, remit only the difference (if any) between the amount of the rebate and the GST/HST you owe on your return. If the rebate is more than the amount of the GST/HST you owe, we will refund you the difference. If you filed your GST/HST return electronically, send the rebate application by mail to the Summerside Tax Centre.

Note
Effective October 4, 2010, if you are a GST/HST registrant, you can file your public service bodies’ rebate applications electronically with your GST/HST returns using GST/HST NETFILE.

If you filed a paper return, write the amount of your rebate on line 111 of your return, and include your completed rebate application with the return.

Unless you are required to file electronically (see Mandatory electronic filing), you can also file two or more returns together, offsetting the net tax you owe on one return with a refund claimed on the other. For example, if your business has branches that file separate returns, you can offset your GST/HST remittance by the amount of any refund to which any of your branches are entitled. To do so, file the returns together.

If you are offsetting a remittance by the amount of a refund or rebate, mail all applicable GST/HST returns and rebate applications together to the address shown on your return. Make sure we receive your return, rebate application, and any remittance by the due date. If you file your return electronically and wish to offset the tax you owe by filing a paper rebate application, you should file the rebate application no later than the day you file your electronic return.

Although financial institutions will accept GST/HST remittances along with returns, you cannot offset amounts owing at your financial institution.

Filing nil returns

You have to file a GST/HST return for every reporting period, even if you have no net tax to remit and are not expecting a refund. In other words, even if you have no business transactions in a reporting period, you still have to file a return. Otherwise, you may experience delays in getting refunds and you can expect to receive a failure to file reminder notice.

How to temporarily stop filing GST/HST returns for specific reporting periods

You may be eligible to stop filing returns for reporting periods during which you have little or no GST/HST to report (for example, if you operate a seasonal or part-time business, or if you are a non-resident who carries on business in Canada only for a short period of time each year).

These reporting periods are called designated reporting periods. To temporarily stop filing GST/HST returns, send us a written request. Once we approve your request, you will not have to file GST/HST returns for all designated reporting periods within a fiscal year, as long as you continue to meet the following criteria:

• you expect that the amount of GST/HST you will charge and other amounts that you must add to your net tax in a reporting period will be $1,000 or less;
• you have met all your obligations with us (customs, income tax, and GST/HST, etc.); and
• you did not revoke a designation for reporting periods in the current fiscal year.

Once approved, a designation for a reporting period may be revoked if you no longer meet the above criteria.

If consecutive reporting periods are to be designated, the total of all the amounts to be added to your net tax for those reporting periods must be $1,000 or less. Any amount owing in a designated reporting period is carried forward to the next reporting period.

You cannot temporarily stop filing GST/HST returns if you are an annual filer or a branch of a registrant, unless the registrant as a whole applies for designated reporting periods.

After you file

Notices and statements

Notice of (re)assessment

Once we have processed your GST/HST return, we will send you a notice of (re)assessment. You can also view the notice of (re)assessment online at My Business Account. This notice explains the results of our assessment of your GST/HST return. It also explains any changes that we made to your return. If there is an amount owing after we assess or reassess your return, we will send you Form RC159,  Amount Owing Remittance Voucher, with your statement. Use this form to pay any outstanding amount.

Note
Form RC159 is not available on our Web site as we can only provide it in a pre-printed format. To order this personalized form , see Ordering personalized remittance forms.

You can also pay the outstanding amount online at My Payment.

An assessment is valid and binding. However, if you do not agree with the assessment, you can file Form GST159, Notice of Objection (GST/HST), no later than 90 days after the date we sent you the notice of (re)assessment.

Statement of Arrears

The Statement of Arrears is going green. The Canada Revenue Agency will be mailing the statement less often to help the environment and reduce your paper burden. To check your up-to-date account balance and transactions, or to request a remittance voucher, go to My Business Account.

When can you expect your refund?

As long as you have included all the necessary information and completed your return correctly, your refunds of net tax claimed on your GST/HST returns will be processed with the least possible delay. We usually process paper returns in about four weeks and electronically filed returns (NETFILE, TELEFILE, EDI, and GIFT returns) in two weeks.

Refund holds

If you have to file any returns under the Excise Tax Act, the Income Tax Act, the Excise Act, 2001, or the Air Travellers Security Charge Act, but have not done so, any GST/HST refund or rebate you are entitled to will be held until all required returns are filed.

Refund off-sets

If you have any outstanding amounts owing under the Excise Tax Act, the Income Tax Act, the Excise Act, 2001, or the Air Travellers Security Charge Act, any GST/HST refund or rebate that you are entitled to may be used to pay that outstanding amount. Any difference will be refunded to you.

What interest do we pay on overpayments and refunds?

We will pay you interest, compounded daily, on an overpayment or refund of net tax claimed on a GST/HST return beginning from the later of:

• 30 days after the day you file the return in which you claim the refund;
• 30 days after the day after the end of the reporting period that is covered by that return; and
• the date of the payment that created the overpayment.

The calculation of interest we pay ends on the day the refund is paid or applied. The interest rate we will use is equal to the basic rate plus 2%. Beginning July 1, 2010, the interest rate we will pay corporations is equal to the basic rate. The basic rate is based on the rate charged on 90-day Treasury bills, adjusted quarterly, and rounded up to the nearest whole percentage.

What penalty and interest do we charge?

Penalties

Failure to file

A penalty will apply to any return you file late unless there is a $0 amount owing or we owe you a refund on that return. We will calculate the penalty as follows:

a)  1% of the amount owing; plus
b)  the result of the following calculation:

25% of the amount you calculated in a)

×

the number of months the return is overdue (to a maximum of 12 months)

Demand to file

If you receive a demand to file a return and do not do so, a penalty of $250 will be charged.

You cannot claim an income tax deduction for any penalty paid or payable for failing to file a GST/HST return.

Interest

Interest equal to the basic rate plus 4% will be charged on an overdue amount.

The basic rate is based on the rate charged on 90-day Treasury bills, adjusted quarterly, and rounded up to the nearest whole percentage.

We charge interest on:

• any overdue balance owing on a GST/HST return;
• late or insufficient instalment payments; and
• any other overdue GST/HST amount that you have to remit to the Receiver General.

To request an interest review or a Statement of Interest online, go to My Business Account.

Note
You cannot claim an income tax deduction for arrears interest paid or payable for outstanding GST/HST amounts.

How do you change a return?

If you need to change a return you have sent us, do not file another return.

If you forgot to include an amount in your ITCs, simply add the omitted amount on line 106 of your next GST/HST return (or include it in your line 108 calculation if you are filing electronically). In most cases, you have up to four years to claim your ITCs. For more information, see Input tax credits.

If you need to increase the amount of the GST/HST charged or collected, or you have incorrectly reported recaptured ITCs send a letter to your tax centre indicating your Business Number, the GST/HST reporting period to be amended, and the corrected amounts per line number on your GST/HST return. Make sure an authorized representative signs the letter and includes the name and telephone number of a person we can contact if needed.

What is the Voluntary Disclosures Program?

The Voluntary Disclosures Program (VDP) allows you to come forward and correct inaccurate or incomplete information or to disclose information on a voluntary basis.

You will not be penalized or prosecuted if you make a full disclosure before we start any enforcement action or investigation against you. You will only have to pay the taxes owing plus interest.

The VDP accepts information that is less than one year overdue, except when disclosures are being made to avoid late-filing charges.

For more information, see Information Circular IC00-1, Voluntary Disclosures Program, or call 1-800-959-5525.

Director's liability

When a corporation fails to remit net GST/HST owing, the directors may be liable to remit that amount.

What records should you keep?

Usually, you have to keep all sales and purchase invoices and other records related to your business operations and the GST/HST for six years from the end of the year to which they relate. However, we may ask you to keep the invoices longer than six years. If you want to destroy your records before the time limit expires, you have to send us a written request and wait for our written approval to do so.

As a registrant, you also need the correct information on the invoices you get from your suppliers to support your ITC claims. Registered businesses should give you invoices showing their Business Number and other required information as described in the chart Sales invoices for GST/HST registrants.

For capital property and improvements to such property, you may want to keep your invoices for a longer period to support any further ITC claims or tax owing in respect of future changes in use of the property.

Note
You can verify if a supplier provided you with a valid GST/HST number by using our online GST/HST Registry.

We administer an audit program. Our auditors may ask to see your records. During an audit, we will make sure that you have charged and reported the GST/HST when required, and that you are entitled to all the ITCs that you claimed on your return(s).

If you are audited

If we audit your records, you will receive a preliminary statement of audit adjustments. You have 30 days to analyze and discuss the adjustments with the auditor and make any representations. After that period, we will issue a notice of (re)assessment.

The notice of (re)assessment explains the results of any assessment or reassessment of your GST/HST return. It also explains any changes that we made to your return. If there is an amount owing after we assess or reassess your return, we will send Form RC159, Amount Owing Remittance Voucher, for you to use to make your remittance. You can also make your remittance online at My Payment.

An assessment is valid and binding. However, if you do not agree with the assessment, you can file Form GST159, Notice of Objection (GST/HST), no later than 90 days after the date we sent you the notice of (re)assessment.

Instalment payments

Who has to make instalment payments?

If you are an annual filer and your net tax for a fiscal year is $3,000 or more, you may have to make instalment payments throughout the following fiscal year.

You can calculate your instalment payments and view their related due dates online. To use the Instalment payment calculator service, go to My Business Account.

These quarterly payments are due one month after the end of each of your fiscal quarters and are usually equal to 1/4 of your net tax from the previous year. You may also choose to base your quarterly instalment payments on an estimate of your net tax for the current year if you expect that your net tax for the current year will be less than it was for the previous year.

Example
You are a corporation with a December 31 fiscal year-end. Your net tax for the 2009 fiscal year was $4,000. You estimate that your net tax for 2010 will be $3,200. We will calculate your quarterly instalments at $1,000 each ($4,000 ÷ 4). However, if you choose to base your instalments on your estimate for 2010, you can make quarterly payments of $800 ($3,200 ÷ 4). Your first instalment is due April 30, 2010. The balance of your net tax for 2009 was due one month earlier, on March 31, 2010.

Note
If you estimate your instalments based on your current year and the instalment payments you make are less than the amount you actually should have paid, we will charge instalment interest on the difference.

When you file your GST/HST return at the end of the fiscal year, deduct the instalment payments you made throughout the year from the net tax you owe on line 110 of your return.

Generally, if the instalments you paid are less than your net tax, you have to remit the difference. If the instalments you paid are more than your net tax, you can claim the difference as a refund.

Note
For information on instalment payments for selected listed financial institutions, see Guide RC4050, GST/HST Information for Selected Listed Financial Institutions, and the Department of Finance’s May 19, 2010 Backgrounder – Financial Institution Rules for the Harmonized Sales Tax (HST), available on their Web site.

Instalment interest

If the instalment payments you make are equal to 1/4 of your net tax from your last fiscal year and you make those payments in full and on time, we will not charge instalment interest, even if your net tax for the year is more than the instalments you made.

Interest on the part of any instalment payment that was not paid or that was paid late will be charged at the end of the fiscal year.

Note
If you realize at any time during the fiscal year that you paid less than your required instalment payment or that you did not pay an instalment on time, you can reduce or eliminate your instalment interest by overpaying your next instalment payment or by paying it early.

Instalment interest is calculated beginning the day after the instalment was due and ending on the earlier of the following dates:

• the day the overdue instalment amount and any accrued interest is paid; and
• the day your net tax owing for the year is due (although interest still applies if there is an overdue balance on your GST/HST return –see Interest).

Instalment interest is equal to the basic rate plus 4%.

The basic rate is based on the rate charged on 90-day Treasury bills, adjusted quarterly, and rounded up to the nearest whole percentage.

New registrants and instalments

If you are a new registrant and an annual filer, you may have to make instalment payments during your next fiscal year even if your net tax is less than $3,000. This could happen if your first year of filing for GST/HST is less than a full fiscal year. To determine if you have to do this, estimate what your net tax will be for your first full year by prorating your net tax from your short filing year.

Divide the net tax for the first short fiscal year by the number of days that you were registered in that fiscal year. Then multiply this amount by 365. If the estimated amount is $3,000 or more, you have to make instalment payments in the next year.

If your net tax for the current or previous year is less than $3,000, you do not have to make quarterly instalment payments in the current year. In this case, you have to file your GST/HST return and send us any GST/HST owing once a year.

You can calculate your instalment payments and view their related due dates online. To use the Instalment payment calculator service, go to My Business Account.

Note
Businesses with branches or divisions that file separate returns should note that the $3,000 threshold applies to the total net tax for the whole business, including all branches and divisions.

Example
You are a sole proprietor. Your first year as an annual filer began on December 12, 2009, and ended on December 31, 2009. Your net tax for those 20 days was $200. To determine if you have to make instalment payments in 2010, prorate your net tax for 2009 as follows:

$200 (net tax) ÷ 20 (days) × 365 = $3,650

Since your estimated annual net tax is more than $3,000, you have to make equal quarterly instalment payments in the 2010 fiscal year. Based on your estimated net tax, calculate the amount of each instalment payment as follows:

$3,650 ÷ 4 = $912.50

You have two payments due on April 30, 2010–your net tax for 2009 and your first instalment for 2010 of $912.50.

If you were registered for complete months in your shortened year, you might find it easier to divide the net tax for the first short fiscal year by the number of months that you were registered in that fiscal year. Then multiply this amount by 12 to determine if you have to make instalment payments.

Example
You are a sole proprietor. Your first year as an annual filer began on May 1, 2009, and ended on December 31, 2009. Your net tax for those eight months was $2,800. To determine if you have to make instalment payments in 2010, prorate your net tax for 2009 as follows:

$2,800 (net tax) ÷ 8 (months) × 12 = $4,200

Since your estimated annual net tax is more than $3,000, you have to make equal quarterly instalment payments in the 2010 fiscal year. Based on your estimated net tax, calculate the amount of each instalment payment as follows:

$4,200 ÷ 4 = $1,050

In this example, you have two payments due on April 30, 2010. Both your net tax for 2009 and your first instalment for 2010 of $1,050 are due on this date.

To start making instalment payments, you need Form RC160, Interim Payments Remittance Voucher. To order this personalized form, see Ordering personalized remittance forms.

You can also make instalment payments online through My Payment – Interim payments. To pay your instalments online, go to My Payment.

Instalment due dates

Instalment payments are due within one month after the end of each of your fiscal quarters.

You can calculate your instalment payments and view their related due dates online. To use the Instalment payment calculator service, go to My Business Account.

How to make instalment payments

Pay electronically using the CRA’s My Payment option. My Payment allows individuals and businesses to make payments online, using the CRA Web site, from an account at a participating Canadian financial institution. For more information on this self service option, go to My Payment.

You can also pay electronically using your financial institution’s Internet or telephone banking service.

If you choose not to pay electronically, you can use Form RC160, GST/HST Interim Payments Remittance Voucher, to make your instalment payments. It is important that you submit this voucher with your payment.

You will not automatically receive Form RC160 for your next instalment payment unless you make the current payment.

Form RC160 is not available on our Web site as we can only provide it in a pre-printed format. To order this personalized form, see Ordering personalized remittance forms.

Statement of Interim Payment

We will send you this statement after each instalment payment you make to:

• confirm we received your payment;
• provide your instalment credit balances by period;
• show transfers in and out of your instalment account; and
• show how we applied your instalment credits to assessments.

Beginning October 1, 2010, we will issue this statement once every six months.

We will also send two copies of Form RC160. One copy is for your next instalment payment and the other is for you to keep in case you need to mail another payment. You can also view your up-to-date account balance, transactions, and transfer payments online. To do so, go to My Business Account.

Harmonized sales tax

The participating provinces harmonized their provincial sales tax with the GST to implement the harmonized sales tax (HST) in those provinces.

Beginning July 1, 2010, the HST rate in British Columbia (BC) is 12% (5% federal part and 7% provincial part); in Ontario, the HST rate is 13% (5% federal part and 8% provincial part); and in Nova Scotia, the HST rate is 15% (5% federal part and 10% provincial part).

In the remaining participating provinces the HST rate is 13% (5% federal part and 8% provincial part).

Generally, the HST has the same basic operating rules as the GST and is applied at a single rate on the same base of goods and services that are taxable under the GST. This section covers specific issues related to the HST.

HST registration

If your business is registered for the GST, your business is also registered for the HST. As a GST/HST registrant, you have to collect and remit the HST on taxable (other than zero-rated) supplies you make in the participating provinces. You collect and remit the GST on supplies you make outside the participating provinces.

You can claim an ITC for the HST you pay when you buy goods and services in a participating province to use in your commercial activities, even if your business is not located in a participating province.

Tax on supplies of property and services made in participating provinces - Place-of-supply rules

Specific rules apply to determine whether a supply is made in or outside of a participating province.

Goods

Sales

You sell goods in a participating province and collect the HST if you deliver or make the goods available to the customer in that province. When you do not deliver the goods yourself, we consider goods to be delivered in the province to which:

• you ship the goods;
• the goods are shipped on a common carrier that you retain on behalf of the customer; or
• you send the goods by courier or mail.

Example
You are a supplier of office furniture in Prince Edward Island. In August, 2010, you sell a desk to a customer in Nova Scotia and you deliver it to the customer there. The HST rate of 15% applies to the furniture.

Rentals and leases of goods – Three months or less

You rent or lease goods in a participating province and collect the HST if the customer has continuous possession or use of the goods for three months or less, and you deliver the goods or make them available to the customer in that province.

Note
We may consider goods to be delivered to a province in certain circumstances where you do not deliver the goods yourself. For more information, see Sales above.

Example
In July 2010, you rent a video camera in Nova Scotia to use while travelling through several provinces. The rental agreement is for two weeks. Since Nova Scotia  is the place of supply, the HST rate of 15% applies on the rental.

Rentals and leases of goods – More than three months

When you rent or lease goods (other than most motor vehicles) for a period of more than three months, the agreement is treated as a series of separate supplies for each lease interval to which a particular payment is attributable.

We consider each lease interval to be made in the province where the good is ordinarily located as indicated at the beginning of each lease interval.

Example
A national leasing company leases a photocopier for a four-year period to a consulting firm operating in BC. The photocopier is usually stored and maintained at the firm’s office in BC. During the second lease interval, the firm expands its operations to Alberta and relocates the photocopier to the firm’s new office in Alberta. In this case, the payment for the first two lease intervals is subject to the HST at 12% (the HST rate in BC) and the third lease interval is subject to the GST.

For information on sales, rentals, or leases of motor vehicles that have to be registered in a particular province, see Rules for motor vehicles.

Services

The new rules are effective for supplies made in Canada after April 30, 2010. Under these rules, a supply of a service will generally be regarded as made in a province where the supplier obtains a single home or business address of the recipient in the ordinary course of its business and that address is situated in that province. Where the supplier does not obtain any home or business address of the recipient in the ordinary course of its business, but obtains another single address in Canada of the recipient, that address will be used in determining the place of supply.

For more information on determining the place of supply of a service where multiple addresses are obtained, or where a more specific place of supply rule applies, see GST/HST Technical Information Bulletin B-103, Harmonized Sales Tax - Place of supply rules for determining whether a supply is made in a province.

Example
An accounting firm in Calgary, Alberta is hired by a company located in Kelowna, BC. The accounting firm obtains only one address of the company, the business address in Kelowna, BC, as part of its ordinary information management practices. Because the supplier obtains the recipient’s business address in Kelowna, BC, the service is subject to the HST at 12%.

Where, in the ordinary course of business, the supplier does not obtain an address in Canada of the recipient, the supply will be regarded as made in a participating province if the services that are performed in Canada are performed primarily in the participating provinces. The supply will be regarded as made in the participating province in which the greatest proportion of the service is performed. In the case where the greatest proportions of the service are performed in two or more participating provinces and it cannot be determined in which participating province the greatest proportion of the service is performed, the HST will apply at the rate that is highest among those participating provinces.

Example
A human resources consulting firm with offices in a number of provinces is hired to conduct an executive search in BC and Alberta for a Seattle-based company. The consulting firm does not obtain a Canadian address of the recipient of the supply. Seventy percent of the services performed in Canada are performed in BC. If the service is not zero-rated, the service is subject to the HST at 12% (the rate of the province where the greatest proportion of the service is performed).

The supply will be regarded as being made in a non-participating province if the services performed in Canada are not primarily performed in the participating provinces. In other words, if the services are performed primarily in the non-participating provinces or are performed equally in participating and non-participating provinces, the services are subject to the GST at 5%.

Personal services

A personal service, generally, is a service that is performed in the physical presence of the individual to whom the service is rendered (for example, a haircut or a massage) other than an advisory, consulting or professional service.

A personal service will generally be regarded as made in the province where the service is performed.

Example
A hair cutting service performed at a hair salon located in Sudbury, Ontario will be subject to the HST at 13%.

Where the supply of a personal service is performed in two or more provinces, the following rules apply:

• If the service is performed primarily in the participating provinces, the supply will be subject to the HST. The supply will be regarded as made in the participating province where the greatest proportion of the service is performed.
• If the service is performed primarily in the non-participating provinces or if it is performed equally in non-participating provinces and participating provinces, the supply will be regarded as made in a non-participating province and would be subject to the GST at 5%.

Example
A service of providing an interpretative tour of the Canadian Shield is performed 50% in Ontario and 50% in Manitoba. The supply of the services is regarded as having been made in a non-participating province and is subject to the GST at 5% since the supply is performed equally in non-participating provinces and participating provinces.

Services in relation to real property

A supply of a service in relation to real property will be regarded as made in the province where the real property to which the service relates is situated.

Where the supply of a service is in relation to real property situated in two or more provinces, the following rules apply:

• If the real property in Canada to which the service relates is situated primarily in the participating provinces, the supply will be subject to the HST. The supply will be regarded as made in the participating province (and taxed at the applicable HST rate for that province) where the greatest proportion of the property is situated. If the greatest proportion of the real property is situated in two or more participating provinces and it cannot be determined in which participating province the greatest proportion of the real property is situated, the HST will apply at the rate that is highest among those participating provinces.
• If the real property in Canada to which the service relates is situated primarily in the non-participating provinces or if it is situated equally in non-participating provinces and participating provinces, the supply will be subject to the GST. The supply will be regarded as made in a non-participating province.

Example
A property management company is hired to provide property management services for real property situated in three provinces (40% in Ontario, 40% in BC and 20% in Alberta). The supplier will charge HST at a rate of 13% since the real property is primarily situated in the participating provinces, the greatest proportion of the real property is situated in two or more participating provinces and the highest rate among those provinces is 13%.

Services in relation to tangible personal property

Generally, a service in relation to tangible personal property (TPP) will be subject to the HST if the Canadian element of the service is performed on the TPP while the TPP is situated primarily in a participating province (at the applicable HST rate for that province). If the TPP is situated primarily in participating provinces when the Canadian element of the service is performed, but not all of the TPP is situated in a single participating province, the supply is regarded as made in the participating province where the greatest proportion of the TPP that is situated in the participating provinces, is situated. If the greatest proportions of the TPP are situated in two or more participating provinces, the HST will apply at the rate that is highest among those participating provinces.

Example
A national appliance repair company is hired to provide appliance repair services in respect of TPP situated in three provinces (40% in BC, 40% in Saskatchewan and 20% in Ontario). Assuming a single supply is being made, the repair company will charge the HST at 12% since the TPP is situated primarily in the participating provinces of BC and Ontario and the participating province in which the greatest proportion of the TPP is situated is BC.

Generally, a service in relation to TPP will be subject to the GST if the Canadian element of the service is performed on the TPP while the TPP is situated primarily in a non-participating province or if the Canadian element of the service is performed on TPP situated equally in non-participating provinces and participating provinces.

Example
A national appliance repair company is hired to provide appliance repair services in respect of TPP situated in three provinces (40% in Saskatchewan, 40% in Ontario and 20% in Manitoba). Assuming a single supply is being made, the repair company will charge GST at 5% since the TPP is situated primarily in the non-participating provinces of Saskatchewan and Manitoba.

Note
Other rules apply for situations not discussed in this section, such as services in relation to TPP where the property is moved to another province while the Canadian element of the service is performed. Additionally, there are separate rules for other types of services, such as telecommunications services, postal services and transportation services. For more information, see GST/HST Technical Information Bulletin B-103.

Intangible personal property

Generally, a supply of intangible personal property (IPP) with Canadian rights (rights that can be used in Canada) is made in a participating province where the rights can be used only primarily in participating provinces and the greatest proportion of the use of the rights in participating provinces can only be used in that participating province.

Example
The sale of a franchise to operate a retail establishment and sell the franchiser’s product in Sydney, Nova Scotia is subject to the 15% HST rate for Nova Scotia.

In the case where the rights can only be primarily used in the non-participating provinces, the supply would generally be made in a non-participating province.

Where it cannot be determined where the Canadian rights can be used only primarily, or where the rights can be used equally in the participating provinces and non-participating provinces, the supply will generally be made in that province where:

• the supplier has obtained a single home or business address for the recipient that is located in that province in the ordinary course of its business; and
• the Canadian rights in respect of the IPP can be used in that province.

Where an address is not obtained, the HST would generally apply at the highest rate among the participating provinces where the rights can be used.

For more information on determining the place of supply where multiple addresses in different provinces are obtained, or where a home or business address is not obtained see GST/HST Technical Information Bulletin B-103, Harmonized Sales Tax - Place of supply rules for determining whether a supply is made in a province.

The above rules do not apply where IPP costing $300 or less is purchased by the recipient or the recipient's agent from a permanent establishment of the supplier or a vending machine in a particular province and the rights can be used in that province. In this case, the supply is made in that province.

Intangible personal property relating to real property and goods

Different rules apply for IPP relating to real property and for IPP relating to goods.

A supply of IPP that relates to real property will generally be made in a participating province where the real property in Canada is situated primarily in the participating provinces and, among the participating provinces, the greatest proportion of the real property is situated in that participating province.

A supply of IPP that relates to goods will generally be made in a participating province where the goods ordinarily located in Canada are ordinarily located primarily in the participating provinces and, among the participating provinces, the greatest proportion of the goods are ordinarily situated in that participating province.

Generally, where a supply of IPP is determined to be made in the participating provinces and the real property is situated, or the goods are ordinarily located, equally in two or more participating provinces, the HST will apply at the rate that is highest among those participating provinces that have the greatest proportions of the real property situated in them, or goods ordinarily located in them.

A supply of IPP that relates to Canadian real property that is situated primarily outside participating provinces, or to goods ordinarily situated in Canada that are ordinarily situated primarily outside participating provinces, is regarded as made in a non-participating province.

Tax on property and services brought into a participating province

You may have to self-assess the provincial part of the HST if you buy goods, services or IPP in a non-participating province, but you use, consume, or supply them within the participating provinces. The provincial part of the HST is 7% in BC, 10% in Nova Scotia and 8% in the remaining participating provinces.

You may also have to self-assess if you use, consume, or supply goods, services or IPP in a participating province with a higher HST rate than the participating province where you acquired them.

Exception
You may not be required to self-assess the provincial part of the HST if you are a registrant and the property or service is consumed, used, or supplied at least 90% in your commercial activities.

This exception does not apply to motor vehicles required to be registered in a participating province. For more information, see Rules for motor vehicles. This exception also does not apply to persons using simplified accounting.

Note
You will not have to pay the provincial part of the HST if the tax payable for all self-assessed amounts of the provincial part of the HST for property and services brought into participating provinces in the calendar month in which the property or service is brought into the participating province and, in the case of a specified motor vehicle, in which the vehicle is registered or required to be registered, whichever is earlier, is no more than $25.

The provincial part of the HST generally applies to goods, mobile homes that are not affixed to land, and floating homes that are brought into Ontario or BC after July 1, 2010. There are exceptions. For example, the HST would generally apply to an amount that was paid or became payable after April 30, 2010, and before July 1 2010, for a sale of goods that are delivered, and for which ownership is transferred, to the purchaser on or after June, 2010. For more information, see GST/HST Notice 247, Harmonized Sales Tax for Ontario and British Columbia - Questions and Answers on General Transitional Rules for Personal Property and Services.

Goods

You have to self-assess the provincial part of the HST when:

• you buy taxable (other than zero-rated) goods:
  • in a non-participating province and you later bring, or cause someone else to bring, the goods into a participating province; or
  • in a participating province and you later bring, or cause someone else to bring, the goods into another participating province for which the rate of HST is higher; and
• you consume, use, or supply the goods less than 90% in your commercial activities.

Note
Self assessment of the provincial part of the HST may be required in some cases if you are a registrant and the property is consumed, used, or supplied at least 90% in your commercial activities.

If you purchased the goods (other than a motor vehicle) from someone with whom you are dealing at arm's length, you have to remit the provincial part of the HST on the lesser of:

• the amount paid or payable for the goods; and
• the fair market value of the goods when they are brought into a participating province.

If you purchased goods (other than a motor vehicle) from someone with whom you are not dealing at arm's length, you have to remit the provincial part of the HST on the fair market value of the goods when they are brought into a participating province.

The tax is payable when the goods, other than specified motor vehicles, are brought into a participating province. Enter this amount on line 405 of your GST/HST return. You may be entitled to claim an ITC for the tax you self-assess on the goods depending on the percentage of use in your commercial activities. For more information, see Volume discounts.

Example
You are a registrant located in Newfoundland and Labrador. You buy a $2,000 computer in Alberta, which you bring back to Newfoundland and Labrador. At that moment, the fair market value of the computer is $2,000. You use the computer 40% in your business. You have to self-assess the 8% provincial part of the HST and remit $160 ($2,000 x 8%). You cannot claim an ITC for this tax since you are using the computer 50% or less in your commercial activities.

For information on bringing a motor vehicle into a participating province, see Rules for motor vehicles.

Services

You generally pay GST when you receive a supply of a service that is made in a non-participating province. If you are a resident of a participating province and you acquire a service in a non-participating province, you will have to self-assess the provincial part of the HST if the total consumption, use or supply in the participating provinces is 10% or greater.

The same rule applies for a supply of a service that is made in a participating province if the total consumption, use, or supply of the service in participating provinces with a higher rate of HST is at least 10%.

Note
You do not have to self-assess the provincial part of the HST if you are a registrant and the service is consumed, used, or supplied at least 90% in your commercial activities or on certain transportation and telecommunication services, certain legal services, or where the service is for goods that are removed from the participating province as soon as the service has been performed.

Intangible personal property

If you are a resident in a participating province and you receive a supply of intangible personal property (IPP) (such as franchise rights) that is made in a non-participating province where the total use, consumption, or supply of the IPP in the participating provinces is 10% or greater, you have to self-assess the provincial part of the HST.

The same rule applies for a supply of IPP that is made in a participating province if the total use, consumption, or supply of the IPP in participating provinces with a higher rate of HST is at least 10%.

Note
You do not have to self-assess the provincial part of the HST if you are a registrant and the IPP is used, consumed or supplied 90% or more in your commercial activities. You also do not have to self-assess the provincial part of the HST on certain supplies of IPP including IPP supplied by way of certain leases and licences and in certain instances where the person previously paid tax on the IPP.

Self-assessing for services and IPP

The amount of tax to be self-assessed is determined by the formula:

A × B × C
A	is: the provincial part of the HST (7% in BC, 10% in Nova Scotia, or 8% in the other participating provinces) in the participating province where consumption, use or supply is to occur, where a supply of a service or IPP was originally made in a non-participating province, or for a supply of a service or IPP that was made in a participating province that is for consumption, use or supply in another participating province for which the rate of HST is higher, the difference between the rate of HST in the higher rate participating province and the rate of the participating province where the supply occurred;
B	is the consideration for the service or IPP that is paid or payable at that time; and
C	is the percentage that you consume, use, or supply the service or IPP in the participating province for which you are making the calculation.

The tax is payable when the payment for the service or IPP is paid or becomes due, whichever is earlier. Enter the amount on line 405 of your GST/HST return. You can also claim an ITC for the tax you self-assessed on these services and IPP to the extent that they are for consumption, use, or supply in your commercial activities.

Rules for motor vehicles

Sales

Sales by registrants

The general place of supply rules described on the previous pages for sales of goods apply to sales of new and used motor vehicles by registrants. Therefore, the HST applies to new or used vehicles sold by registrants when the vehicle is delivered or made available in a participating province to the purchaser.

When the vehicle is delivered or made available in a non-participating province to a purchaser by a registrant who collects the GST, the purchaser is required to self-assess the provincial part of the HST when the vehicle is brought into a participating province. Additionally, when a purchaser brings a vehicle from a participating province with a lower rate for the provincial part of the HST into a participating province with a higher rate for the provincial part of the HST, the purchaser is required to self-assess the difference between the two rates.

The tax is payable to the Receiver General, but collected by the provincial licensing authorities on the earlier of:

• the day you register the vehicle at a provincial licensing office in the participating province; or
• no later than the day you are required to register the vehicle.

You follow the same rules when you buy a motor vehicle outside Canada and you bring the vehicle into a participating province. In this case, the GST is collected at the border by the Canada Border Services Agency and you pay the provincial part of the HST when you register the vehicle in that province.

Sales by a non-registrant

When you buy a motor vehicle from a non-registrant and the sale is not taxable, you generally have to pay a special provincial levy when you register the vehicle in the participating province. The province determines the rate of the levy. The provincial levy applies whether you bought the vehicle in a participating province or you bought it in a non-participating province and brought it into a participating province. For more information, see Pamphlet RC4100, Harmonized Sales Tax and the Provincial Motor Vehicle Tax.

Note
You cannot recover the provincial levy as an ITC, even if the vehicle is used in your commercial activities.

Rentals

The general place of supply rules for a rental of goods for three months or less also apply to rentals of motor vehicles.

Leases

A lease of a motor vehicle for more than three months is treated as a series of separate supplies for each lease interval for which a lease payment is required. A lease of a motor vehicle is made in a participating province if, at the beginning of the lease interval, the vehicle has to be registered in that province.

Example
A car-leasing company in Manitoba leases you a car for 24 months with monthly lease payments. You register the vehicle in Ontario after June 30, 2010. Each of the lease payments is subject to the HST if the car stays registered in Ontario. If, in the middle of the 18th month, you move to Manitoba, the six remaining monthly lease payments are subject to the GST.

Coin-operated machines

Generally, any good, service, or a right to use a machine that you sell through vending machines or coin-operated machines is subject to the GST/HST. This includes products such as milk and fruits that are usually zero-rated.

The price of these goods, services, or rights to use the machine includes the GST/HST. You are considered to have collected the GST/HST when you remove the money from the vending or coin-operated machine.

However, the GST/HST is equal to zero on a supply of a good, service, or right to use a machine made through a coin-operated machine if it is designed to accept only a single coin of 25¢ or less as the total amount payable for the good, service or right. For example, if you sell a lollipop in a vending machine for 25¢, and the vending machine only accepts one 25¢ coin, the GST/HST is equal to zero.

The above rule does not apply to machines that accept coins of more than 25¢ (such as $1 or $2 coins) or machines that accept more than one coin as the amount payable for the good, service, or right.

Note
The right to use a coin-operated washing machine and clothes dryer located in a common area of a residential building is exempt from the GST/HST.

Coupons, rebates, gifts, and promotional allowances

Reimbursable coupons

Reimbursable coupons are usually called manufacturers coupons. They entitle the customer to a reduction of a fixed dollar amount on the purchase price. Vendors can expect to be reimbursed by the manufacturer or another third party for accepting these coupons from customers. Their value includes the GST/HST, when used to purchase taxable supplies (other than zero-rated goods or services).

When you, as a vendor, accept a reimbursable coupon from a customer, you treat the coupon the same as cash. If the purchase is subject to tax, you charge the GST/HST on the full price of the item and then deduct the value of the coupon. We consider you to have collected a portion of the GST/HST equal to the tax fraction of the value of the coupon. The tax fraction for the GST is 5/105, and for the HST is 12/112 in BC, 15/115 in Nova Scotia, or 13/113 in the remaining participating provinces. For example, a coupon for $1.00 off the selling price includes:

• 5¢ for the GST ($1.00 × 5 ÷ 105);
• 11¢ for the HST in BC ($1.00 × 12 ÷ 112);
• 13¢ for the HST in Nova Scotia ($1.00 × 15 ÷ 115); or
• 12¢ for the HST in the remaining participating provinces ($1.00 × 13 ÷ 113).

The manufacturer reimburses you for the coupon value of $1.00, which includes the GST/HST.

Tax fractions before 2008

If you are claiming an ITC for a reimbursable coupon that you accepted before January 1, 2008, use the following rates to calculate the tax fraction:

After June 30, 2006, and before January 1, 2008

• 6 ÷ 106 for the GST; or
• 14 ÷ 114 for the HST.

Before July 1, 2006

• 7 ÷ 107 for the GST; or
• 15 ÷ 115 for the HST.

If you are the manufacturer, you can also claim an ITC (other than for zero-rated supplies) for the tax fraction of the coupon value. However, the vendor who accepts the reimbursable coupons from the customer cannot claim any ITCs for these coupons since you reimburse the vendor the tax.

Non-reimbursable coupons

These are coupons that you, as the vendor, issue and accept, and for which no one reimburses you. They entitle the customer to a reduction in the price for a fixed dollar amount or a percentage amount. As the issuer, you can either include a reduction of the GST/HST in the face value of these coupons or reduce the purchase price of the good or service (other than zero rated good or services).

If you choose to include the GST/HST in the value of the coupons, you treat them the same way as reimbursable coupons. This means that you charge and remit the GST/HST on the full price of the good or service and you can claim an ITC calculated on the tax fraction of the coupon value.

If you choose not to include the GST/HST in the value of your coupons, deduct the coupon value from the selling price before calculating the GST/HST.

In this case, when you file your GST/HST return, report the GST/HST you charged on the sale after you deducted the coupon from the purchase price ($1.00 GST in the above example). You cannot claim ITCs for coupons you issue that do not include the GST/HST.

Other coupons

Other coupons (whether reimbursable or not) that are not for a fixed dollar amount may:

• offer a different percentage off the price of an item (such as 10% off the purchase of 5 or less boxes and 20% off the purchase of 6 or more boxes);
• offer an item for no charge if another item is purchased (such as two-for-one coupons); or
• contain more than one monetary discount such as 25¢ off a 750 ml soft drink or 50¢ off a 1.5 litre soft drink.

These coupons reduce the selling price of an item before the GST/HST is added. Therefore, deduct the value of the coupons from the selling price before calculating the GST/HST.

Manufacturers' rebates

Some manufacturers include a rebate application with the goods or services they sell. After buying the item from the retailer, the customer completes the application and mails it directly to the manufacturer. Since the payment of the rebate is a separate arrangement between the manufacturer and the customer, the retailer has to remit the GST/HST collected on the full selling price of the taxable goods or services without deducting the value of the manufacturer's rebate.

The GST/HST rules for manufacturers’ rebates apply when:

• the supply of goods or services to the customer is made either directly by the manufacturer or by another person such as a retailer; and
• the customer is made aware in writing that the rebate includes the GST/HST.

Example
A customer buys a package of batteries in your hardware store in Saskatchewan for $10 plus the GST. Inside the package is an application for a $2 rebate to complete and mail to the manufacturer. You collect and remit tax on $10, the full price of the batteries. The customer completes the rebate application and mails it to the manufacturer. Once the manufacturer receives the application it will send the customer a cheque for $2.

Some manufacturers give rebates to their customers through the retailer when the customer buys the goods. Even if the retailer applies the rebate toward the retail price of the goods, the retailer collects the GST/HST on the full retail price before deducting the rebate amount.

Manufacturers who pay rebates can claim an ITC for the GST/HST (equal to 5 ÷ 105 for GST or for the HST, 12 ÷ 112 in BC, 15 ÷ 115 in Nova Scotia, or 13 ÷ 113 in the remaining participating provinces) of the rebate amount in the reporting period in which they paid the rebate.

If you are claiming an ITC for a manufacturers' rebate that you accepted before January 1, 2008, see Tax fractions before 2008.

If the customer receiving the rebate is a registrant who is entitled to claim an ITC or a GST/HST rebate on the purchase, the manufacturer has the option of calculating the GST/HST on the value after the reduction is applied. In this case, the manufacturer will not claim an ITC on the rebate amount. Otherwise, if GST/HST is indicated as included in the rebate, the customer, if a registrant, will have to remit the GST/HST (equal to 5 ÷ 105 for the GST or for the HST, 12 ÷ 112 in BC, 15 ÷ 115 in Nova Scotia, or 13 ÷ 113 in the remaining participating provinces) of the rebate amount.

Gift certificates

A gift certificate is generally a voucher, receipt, or ticket:

• that has a stated monetary value;
• that can be redeemed as a partial or full payment against the purchase price of a good or service from a specific supplier (the supplier treats the redeemed certificate as if it were cash);
• for which the person purchasing the certificate gives money or other consideration to the vendor selling the certificate;
• that doesn't require the person redeeming a certificate to do anything other than present the gift certificate; and
• that has no intrinsic value.

You do not collect the GST/HST on the sale of a gift certificate. When a customer gives you a gift certificate towards a purchase, calculate the GST/HST on the price of the item and deduct the amount of the gift certificate as if it were cash.

Promotional gifts and free samples

You do not charge the GST/HST on promotional gifts you give your customers or that you distribute as a bonus with another item for no additional charge. You can claim an ITC for the GST/HST paid or payable on your purchases to supply these gifts as long as they relate to your commercial activities. For example, if the free gift is to promote the supply of an exempt service, you will not be able to claim an ITC to recover the GST/HST paid or payable on any purchases related to that free gift.

Promotional allowances

Promotional allowances are amounts given by a manufacturer to a retailer who has purchased taxable goods from that manufacturer, exclusively for resale in the course of its commercial activities, to promote these goods. The retailer does not consider a promotional allowance as payment for a supply made to the manufacturer providing the allowance. However, there may be tax implications depending on how the allowance is paid, credited, or allowed as a discount.

If the allowance is given as a discount or credit against the price of a previous purchase for which tax has been charged or collected, the manufacturer has a choice of either giving the credit without adjusting the tax or adjusting the tax and issuing a credit or debit note. For more information, see Returned goods.

If the allowance is given as a discount against the goods at the time of purchase, the GST/HST applies on the reduced price.

If the payment or credit is not a price reduction attributable to any invoice, it is considered to be a manufacturers' rebate.

Deposits and conditional sales

Deposits

You do not collect the GST/HST when a customer gives you a deposit towards a taxable purchase. Collect the GST/HST on the deposit when you apply it to the purchase price.

If the customer does not make the purchase and loses the deposit, the forfeited deposit is subject to the GST/HST. If the customer is a GST/HST registrant, the customer can claim an ITC for the GST/HST paid on the forfeited deposit. You calculate the GST/HST on the forfeited deposit as follows:

• the GST is equal to 5/105 of the forfeited amount; and
• the HST is equal to 12/112 in BC, 15/115 in Nova Scotia, or 13/113 in the remaining participating provinces, of the forfeited amount.

Example
A customer gives you a deposit of $50 towards the purchase of an item that is taxable at 5% GST, but does not pay the balance owing and forfeits the deposit. We consider you to have collected the GST equal to 5 ÷ 105 of the forfeited deposit. As a result, you have to include GST of $2.38 ($50 × 5 ÷ 105) in your net tax calculation. If the customer is a GST/HST registrant, that person may be entitled to claim an ITC for the GST you collected on the forfeited deposit. If you are in a participating province, the HST collected is equal to $6.52 ($50 × 15 ÷ 115 in Nova Scotia), $5.36 ($50 × 12 ÷ 112 in BC), or $5.75 ($50 × 13 ÷ 113 in the remaining participating provinces).

Exception
These rules do not apply to deposits for returnable containers. For more information, see Returnable beverage containers.

Conditional and instalment sales

A conditional sale takes place when you transfer possession of goods to a customer, but ownership passes only after the sale meets certain conditions, such as when the purchase price has been paid in full. In this type of sale, the customer agrees to make payments for the goods over a period of time. The customer takes possession of the goods, but you keep title or ownership of the goods until the customer has met the specified conditions.

In an instalment sale, the ownership passes immediately but the customer pays the purchase price in instalments. You transfer title or ownership and possession of the goods at the time the agreement is entered into, and the customer agrees to make payments over a period of time.

In both cases, you have to include the tax in your net tax calculation for the reporting period that includes the earlier of the date you issued the invoice and the date you received payment. Any amount of tax that has not been paid or invoiced by the end of the following month from the time you transferred possession or ownership of the goods (whichever is earlier) is considered due at that time and has to be included in your net tax calculation at that time.

Employees and partners

Employee benefits

You may be considered to have collected the GST/HST on supplies of non-cash taxable benefits you give your employees. However, you are not considered to have collected the GST/HST on salaries, wages, commissions, and other cash remuneration, including gratuities, you pay to employees.

Employers who are GST/HST registrants may have to remit the GST/HST on certain benefits provided to employees such as the personal use of an employer's automobile, board and lodging, incentives, and gifts worth more than $500. If you do, you have to calculate the GST/HST for the taxable employee benefits at the end of February following the year in which you gave the benefit. This matches the deadline for calculating employee benefits and issuing T4 slips for income tax purposes. You have to include the GST/HST on the benefits in the GST/HST return for the reporting period that includes the last day of February.

For more information, see Guide T4130, Employers' Guide - Taxable Benefits and Allowances.

Employee and partner GST/HST rebate

The employee and partner GST/HST rebate allows employees to recover the GST/HST they paid on eligible employment expenses. The rebate is deducted from their tax payable on their income tax return. It also allows partners (who are individuals) to recover the GST/HST they paid on expenses they deducted from their share of the partnership income on their income tax return. Examples include travel, meals, professional dues, and legal and accounting fees.

Employees and partners who do not receive a reasonable allowance or reimbursement on eligible employment expenses or who have to include allowances in their income are also eligible for the employee and partner GST/HST rebate.

Employees and partners can apply for the rebate by completing Form  GST370, Employee and Partner GST/HST Rebate Application, and filing it with their income tax return within four years after the end of the year or a date agreed by the Minister. The amount you calculate as a rebate on Form GST370 is reported on line 9974 of your income tax return. For more information, see Guide T4044, Employment Expenses, and Guide RC4091, GST/HST Rebate for Partners.

Exception
Employees of a listed financial institution cannot claim the employee and partner GST/HST rebate.

Exports and imports

Exported goods

Goods (other than excisable goods such as beer, spirits, wine, and tobacco products) that are ordinarily taxed at 5%, 12%, 13%, or 15% are zero-rated (taxed at 0%) if you:

• ship the goods to a destination outside Canada that is specified in the contract for carriage of the property;
• transfer possession of the goods to a common carrier or consignee that either you or the purchaser’s employer retained for the purchaser to ship the goods to a destination outside Canada; or
• send the goods by mail or courier to an address outside Canada.

If the purchaser takes delivery of the goods in Canada, your supply of the goods may still be zero-rated if all of the following conditions are met:

• The purchaser is not a consumer (a consumer is usually an individual who is buying the goods for his or her personal use).
• The purchaser exports the goods as is reasonable in the circumstance after you deliver them.
• The purchaser does not buy the goods to consume, use, or supply in Canada before exporting them.
• After buying the goods and before exporting them, the purchaser does not further process, transform, or alter the goods in Canada, unless it is reasonably necessary or incidental to transport them.
• You keep satisfactory evidence, for audit purposes, that the purchaser has exported the goods.
• If the property being exported is electricity, crude oil, natural gas, or any good that can be transported by means of a wire, pipeline or other conduit, the purchaser is not registered for GST/HST purposes.

You generally have to charge (and the purchaser has to pay) the GST/HST on taxable supplies if the above conditions are not met.

Rebate for exported goods

A non-resident purchaser may be able to apply for a rebate to recover the tax paid on goods acquired for commercial use primarily (more than 50%) outside Canada (other than gasoline and excisable goods, such as beer, wine, spirits, and tobacco products). To qualify for the GST/HST rebate, the non-resident purchaser has to export the goods from Canada within 60 days of delivery, as well as meet other conditions. For more information, see Guide RC4033, General Application for GST/HST Rebates, which includes Form GST189, General Application for Rebate of GST/HST.

Export trading house program

A purchaser (other than a consumer) who is registered for GST/HST purposes and is an authorized export trading house can issue an export certificate, which, when provided to the supplier, will cause the goods to be zero-rated. For more information on the export trading house program and export certificates, see GST/HST Memorandum 4.5.2, Exports - Tangible Personal Property.

Export Distribution Centre Program

Under the Export Distribution Centre Program (EDCP), authorized export-oriented, non-manufacturing businesses can use a certificate to acquire or import most inventory and parts, or to import a customer's goods for processing, without paying the GST/HST. Eligible registrants who want to use the EDCP certificate must apply to us for authorization. Authorizations will remain in effect for three years, unless revoked earlier, and can be renewed. For authorization to use an EDCP certificate, send us a completed Form GST528, Authorization to Use an Export Distribution Centre Certificate. For more information on the EDCP, see Technical Information Bulletin B-088, Export Distribution Centre Program.

Exported services

Generally, you do not charge the GST/HST on services you perform totally outside Canada, or on services that relate to real property outside Canada.

Services you perform on temporarily imported goods are zero-rated (except transportation services). The goods must be brought into Canada for the sole purpose of having the service performed on them and must be exported as soon as possible. Any parts supplied along with these services are also zero-rated.

Certain services provided to a non-resident person that are performed all or partly in Canada may be zero-rated, such as:

• certain advisory, professional, or consulting services;
• advertising services to an unregistered non-resident person;
• advisory, consulting, or research services to help a non-resident person establish a residence or business in Canada;
• services and parts for goods or real property under warranty for an unregistered non-resident person;
• custodial or nominee services for the non-resident person's securities or precious metals;
• training services supplied to an unregistered non-resident person (but not to individuals) to teach non-resident individuals in or to give examinations for courses leading to certificates, diplomas, licences, or similar documents, or classes or licence ratings that attest to the individual's competence to practise or perform a trade or vocation;
• services to an unregistered non-resident person of destroying or discarding goods, or the services of dismantling goods for the purpose of exporting them;
• services to an unregistered non-resident person of testing or inspecting goods acquired or brought into Canada for this service and the goods are to be destroyed or discarded in the course of providing the service or upon its completion;
• services of an agent acting for a non-resident person when the service relates to a zero-rated property or service, or if the supply to or by the person is made outside Canada; and
• services of arranging for, procuring, or soliciting orders for supplies by or to the person when the service relates to a zero-rated property or service, or if the supply to or by the person is made outside Canada.

The above list is not exhaustive. For more information, see GST/HST Memorandum 4.5.3, Exports - Services and Intellectual Property.

Exported intangible personal property

Supplies of intangible personal property (IPP) made to non-residents who are not registered for the GST/HST are generally zero-rated.

A supply of an invention, patent, trade secret, trademark, trade name, copyright, industrial design, or other intellectual property, or any right to use such property that is made to a non-registered non-resident is also zero-rated.
The exceptions are:

• a supply made to an individual who is in Canada when the supply is made;
• a supply of IPP that relates to real property in Canada or to tangible personal property that is ordinarily situated in Canada;
• a supply of IPP that relates to a supply of a service that is made in Canada. However, if that service is zero-rated as an export, a transportation service, or a financial service, the supply of IPP related to that service may also be zero-rated;
• a supply of IPP that can only be used in Canada; and
• a supply of making a telecommunications facility that is IPP available for use in providing a telecommunication service.

For more information, see GST/HST Info Sheet GI-034, Exports of Intangible Personal Property.

Note
You can claim ITCs to recover the GST/HST paid or payable on purchases and expenses related to your zero-rated supplies of goods and services. For more information, see Input tax credits.

Imported goods

Goods you import into Canada are subject to the GST or the federal part of the HST, except for items specified as non-taxable importations. Examples of non-taxable importations are:

• certain zero-rated goods (goods that are specifically zero-rated when supplied in Canada, such as prescription drugs, certain medical devices, and basic groceries);
• medals, trophies, and other prizes won outside Canada in competition (but not saleable goods such as an automobile);
• tourist literature imported by governments or specified organizations for public distribution free of charge;
• goods imported by a charity or public institution that have been donated to the charity or institution;
• goods imported for the sole purpose of maintenance, overhaul, or repairs, if neither title nor use of the goods passes, or is intended to pass, while they are in Canada, and the goods are exported within a reasonable amount of time after the services are completed;
• goods imported by manufacturing service companies where the goods are processed for non-residents and later exported without being used in Canada. Any parts to be used in or attached to, and materials directly consumed or expended in, processing those goods are also non-taxable. The manufacturing service companies must apply in writing for an import certificate to be able to import those goods on a non-taxable basis. For more information , see Technical Information Bulletin B-069, Goods and Services Tax Treatment of Imports by Exporters of Processing Services (Inward Processing);
• warranty replacement property and replacement parts supplied by a non-resident at no charge except for shipping and handling; and
• goods valued at $20 or less sent to a person by mail or courier at an address in Canada, except for the following prescribed goods:
  • excisable goods (such as beer, spirits, wine, and tobacco products); and
  • books, newspapers, magazines, periodicals, or other similar publications, where the vendor was required to register for the GST/HST, but did not do so.

The GST/HST is calculated on the Canadian dollar value of the goods, including duty and excise tax, and is collected at the border at the same time as these duties and taxes. The owner or importer of record is responsible for paying the GST/HST on imported goods. Generally, if you are the importer (the person who caused the goods to be imported into Canada), you can claim an ITC for the tax you paid on the imported goods, as long as you meet the requirements for claiming ITCs.

Taxable non-commercial goods imported by a resident of a participating province are subject to the HST on importation, except for motor vehicles required to be registered in a participating province, or a mobile home or floating home that has been used or occupied in Canada by an individual. The provincial part of the HST on imported motor vehicles is paid at the time the vehicle is registered in a participating province.

Although the provincial part of the HST is not payable when you import commercial goods that are destined for the participating provinces, you may have to self-assess the provincial part. For more information, see Tax on property and services brought into a participating province.

Imported services and intangible personal property

If you buy services (such as architectural services for a building in Canada) or IPP (such as the right to use a patent in Canada) from an unregistered non-resident person outside Canada, you do not pay the GST/HST if you acquire them to use at least 90% in your commercial activities (100% in the case of financial institutions). You also do not have to self-assess the provincial part of the HST if the imported services or IPP are for consumption, use, or supply 90% or more in the non-participating provinces.

If you do not use the imported services or IPP at least 90% in your commercial activities, you have to report the GST or the federal part of the HST on line 405 of your GST/HST return and remit the tax directly to us. The tax is calculated on the amount you were charged for the service or IPP and is payable in the reporting period in which the amount for the service or IPP was paid or became payable.

If you are a resident in a participating province and the imported services or IPP are for use less than 90% in your commercial activities and the services or IPP are for consumption, use, or supply 10% or more in the participating provinces, you also have to pay the provincial part of the HST (7% in BC, 10% in Nova Scotia, and 8% in the remaining participating provinces) on the services or IPP to the extent the services or IPP are for consumption, use or supply in those particular provinces. For more information, see Services or Intangible personal property.

If you are a financial institution and you are a qualifying taxpayer, you may also have to self-assess the GST/HST using the special rules for financial institutions.

If you are not a registrant

If you are not registered for the GST/HST, you still have to pay tax on imported services or IPP. Use Form GST59, GST/HST Return for Imported Taxable Supplies and Qualifying Consideration, to remit the tax. The tax is due by the end of the month following the calendar month in which the amount for the services or IPP was paid or became payable.

Financial services

Generally, financial services are exempt from GST/HST and you cannot claim ITCs on purchases or acquisitions related to them. Examples of exempt financial services include:

• the exchange, payment, issue, receipt, or transfer of money;
• the operation or maintenance of a savings, chequing, deposit, loan, charge, or other account;
• the issue, transfer of ownership, or repayment of a financial instrument, such as:
  • the right to be paid money,
  • the deposit of money,
  • any share or an interest in a share of the capital stock of a corporation,
  • an insurance policy,
  • an interest or a right to an interest in a partnership, a trust, or an estate of a deceased individual,
  • a precious metal, and
  • an option for future supply of a commodity where the option is traded on a recognized commodity exchange;
• the payment or receipt of money as dividends, interest, principal, or benefits;
• the making of any advance, the granting of any credit, or the lending of money; and
• the payment or receipt of an amount in full or partial satisfaction of a claim arising under an insurance policy.

The supply of certain financial services is zero-rated. For more information, see GST Memorandum G300-3-9, Financial Services.

For more information on financial services, see the following publications:

• GST/HST Memorandum 17.1, Definition of "Financial Instrument";
• GST/HST Memorandum 17.2, Products and Services of a Deposit-Taking Financial Institution;
• GST/HST Memorandum 17.6, Definition of "Listed Financial Institution";
• GST/HST Memorandum 17.8, Credit Unions;
• GST/HST Memorandum 17.10, Tax Discounters;
• GST/HST Memorandum 17.14, Election for Exempt Supplies; and
• GST/HST Notice 250, Proposed Changes to the Definition of Financial Service.

Insurance claims

Generally, when an insurance company pays out benefits to compensate a claimant under the terms of an insurance policy, it is providing an exempt financial service. The following is an explanation of two kinds of insurance claims:

• life and health insurance claims; and
• property and casualty insurance claims.

Life and health insurance claims

Under life and health insurance contracts, the settlement of a claim is usually limited to the payment of financial benefits. These payments are financial services and are generally GST/HST-exempt.

Property and casualty insurance claims

Under property and casualty insurance contracts, the insurer agrees to settle a claim for loss or damage to property either by making a cash settlement with the insured, by paying the cost of repairs to the damaged property, or by paying the cost of replacing the damaged property.

Cash settlements

A cash settlement is a financial service and is generally GST/HST-exempt.

Repairs and replacements

There are two ways an insurer can settle a loss related to damaged property:

• The insurer repairs or replaces the damaged property.
• The insurer compensates the insured for the cost of repairing or replacing the damaged property.

The insurer repairs or replaces the damaged property

The insurer purchases repair services or replacement property directly. The insurer would pay the GST/HST and would not be entitled to claim an ITC because the insurer would not be acquiring the property or service for consumption, use, or supply in the course of a commercial activity.

The insurer compensates the insured for the cost of repairing or replacing the damaged property

You, as the insured, acquire the repair services or replacement property directly and are therefore the recipient of the services or property. If you are a registrant, you may be eligible to claim an ITC. If you are a public service body, you may be eligible to claim a rebate. In this situation, the insurer can use the net-of-GST/HST method for settling the property and casualty insurance claim.

The net-of-GST/HST method results in an insurer making a payment for an insurance claim only to the extent of the actual loss suffered by the insured in accordance with the terms of the insurance policy. The amount paid to you by an insurer will be reduced by the amount that you are eligible to claim as an ITC or rebate related to the tax portion of the repair or replacement expense.

For more information, see GST/HST Memorandum 17.16, GST/HST Treatment of Insurance Claims.

Real property

Supplies of real property are generally taxable. This includes supplies by way of sale and by way of lease, licence or similar arrangement. However, there are some specific supplies of real property that are exempt from the GST/HST. Some examples include:

• the sale of a house, that was last used by an individual as a place of residence, where the vendor is not a builder of the house for GST/HST purposes and has not claimed any ITCs for the purchase or improvements to the house;
  Note
  There are special rules that apply to builders. Generally, we use the term "builder" to refer to a person that supplies new or substantially renovated housing. A person does not have to physically carry out the construction or substantial renovation to be a builder for GST/HST purposes. For more information, see Guide RC4052, GST/HST Information for the Home Construction Industry.
• the sale of farmland by an individual to a relative where the farmland was only used in a farming business and the relative is purchasing the farmland for personal use and enjoyment;
• the lease of a house to an individual who occupies it as a place of residence or lodging for a continuous period of at least one month; and
• the lease of a residential unit to an individual who occupies it as a place of residence or lodging for $20 or less a day.

For more information, see GST/HST Memoranda Series Chapter 19, Special Sectors: Real Property.

Purchase and sale agreements entered into before October 31, 2007

If you entered into a written purchase and sale agreement for a new house before October 31, 2007, or if ownership or possession of a new house was transferred before January 1, 2008, different rates of tax apply. You may also be entitled to a transitional rebate in certain circumstances as a result of the 2006 and 2008 rate reductions. For more information, see the following publications:

• GST/HST Info sheet GI-015, GST/HST Rate Reduction and Purchasers of New Housing;
• GST/HST Info sheet GI-043, The 2008 GST/HST Rate Reduction and Purchases of New Housing;
• Form GST192, GST/HST Transitional Rebate Application for Builders of New Housing on Leased Land; and
• Form GST193, GST/HST Transitional Rebate Application for Purchasers of New Housing.

Who remits the tax for a taxable sale of real property – Vendor or purchaser?

If you make a taxable sale of real property, you generally have to charge and collect the tax on the sale, even if you are not registered for the GST/HST. However, in some cases it is the purchaser who has to remit the tax directly to us instead of paying it to you.

Generally, if you are a vendor, you do not collect the tax from the purchaser when you make a taxable sale of real property if:

• the purchaser is registered for the GST/HST - This rule does not apply if you make a taxable sale of housing or a cemetery plot or place of burial, entombment, or deposit of human remains or ashes to an individual, unless you are a non resident;
• you are a non-resident of Canada - This rule still applies if you are considered a resident for only certain activities you carry on through a permanent establishment in Canada; or
• you and the purchaser have made an election using election type 2 on Form GST22, Real Property - Election to Make Certain Sales Taxable. For more information, see the election form.
  
  Note
  These rules only apply to taxable sales of real property. They do not apply, for example, if you lease real property or supply it in any other way.

If you do not have to collect the tax on your taxable sale of real property because one of these conditions applies, the purchaser has to pay any tax due on their purchase directly to us.

If the vendor has to collect and remit the tax

If you are a vendor who has to collect the tax due on your taxable sale of real property, including a house, account for the tax as follows:

• If you are registered for the GST/HST, include the GST/HST collectible on line 103 of your regular GST/HST return to calculate your net tax for the reporting period during which the GST/HST became collectible (or include it in your calculation for line 105 if you are filing electronically).
• If you are not registered for the GST/HST, report the tax collectible on line 103 of Form GST62, Goods and Services Tax/Harmonized Sales Tax ((GST/HST) Return (Non-personalized). You have to file this return by the end of the month following the month in which the tax became collectible and remit the net tax due with that return.

Note
Form GST62 is only available in pre-printed format and is not available for download from our Web site. You can order it online at Getting forms and publications or by calling 1-800-959-2221.

If the purchaser has to pay the tax directly to us

If you have to pay the tax on your purchase of real property directly to us, you account for the tax as follows:

• If you are a GST/HST registrant and will use or supply the real property:
  • more than 50% in your commercial activities, you have to report the tax due on line 205 (GST/HST due on the acquisition of taxable real property) of your GST/HST return for the reporting period in which the tax became payable and remit any positive amount of tax owing for that return; or
  • 50% or less in your commercial activities, you have to report the tax due on Form GST60, GST/HST Return for Acquisition of Real Property. You have to file this return by the end of the month following the month in which the tax became payable and pay the tax due with that return. You cannot file Form GST60 electronically.
• If you are a non-registrant, report the tax due on Form GST60, GST/HST Return for Acquisition of Real Property. You have to file this return by the end of the month following the month in which the tax became payable and pay the tax due with that return.
  
  Note
  Form GST60 is available on our Web site at Forms and publication for GST/HST or by calling 1-800-959-2221. You cannot file this return electronically.

Claiming ITCs for capital real property

The following rules are for GST/HST registrants. Generally, you can claim an ITC equal to either a percentage or the entire amount of the GST/HST paid or payable on purchases of real property (including improvements to real property) that you intend to use in your commercial activities. There are different rules for claiming ITCs for real property, depending on whether you are:

• a corporation or partnership;
• an individual;
• a public service body; or
• a financial institution.

Note
See the chart that summarizes the ITC rules for purchases of real property that are explained in the following sections.

Corporations and partnerships

The rules for claiming ITCs for real property are as follows:

• If the use of the real property in commercial activities is 10% or less, you cannot claim an ITC.
• If the use of the real property in commercial activities is more than 10% and less than 90%, you can claim an  ITC based on the percentage of use in commercial activities.
• If the use of the real property in commercial activities is 90% or more, you can claim a full ITC.

Note
These rules do not apply to a corporation or partnership that is a financial institution.

Individuals

Individuals have to follow the same rules for claiming ITCs for real property as those mentioned for corporations and partnerships. However, an individual cannot claim any ITC for a purchase of capital real property if they use the property more than 50% for their personal use and enjoyment, or for that of a related individual, either individually or in combination.

Public service bodies

The general rule that applies to public service bodies (PSBs) on purchases of capital real property is the same as the rule that applies for calculating ITCs on purchases of other capital property (the primary use rule applies).

However, if a PSB has filed an election to treat certain exempt supplies of a particular real property as taxable, the rules for determining ITCs that apply to corporations and partnerships apply for determining ITCs for the purchase of that particular property and any improvements that the PSB later makes to that property. Real property for which an election was not filed remains subject to the primary use rule (see the chart below).

See the following guides and form for information on the ITC rules that apply to PSBs when they purchase real property:

• Guide RC4049, GST/HST Information for Municipalities;
• Guide RC4081, GST/HST Information for Non-Profit Organizations;
• Guide RC4082, GST/HST Information for Charities; and
• Form GST22, Real Property - Election to Make Certain Sales Taxable.

Financial institutions

Financial institutions have to claim their ITCs for capital real property based on the percentage of use in commercial activities, regardless of whether the property is used 10% or less (or 90% or more) in commercial activities.

ITCs for capital real property
Percentage of use in commercial activities	Partnerships and corporations***	Individuals*	Public service bodies **	Financial institutions
≤10%	None	None	None	% of use
>10% and  ≤50%	% of use	% of use	None	% of use
>50% and <90%	% of use	% of use	100%	% of use
≥90%	100%	100%	100%	% of use
* Individuals cannot claim an ITC if the property is used more than 50% for their personal use or that of a related individual, either individually or in combination. ** Where a PSB is determining ITCs for real property for which it has not made an election. *** Where a PSB is determining ITCs for real property for which it has made an election (for information on the election, see Guide RC4049, GST/HST Information for Municipalities, Guide RC4081, GST/HST Information for Non Profit Organizations, or Guide RC4082, GST/HST Information for Charities).

Claiming ITCs for improvements to capital real property

An improvement to capital real property means any property or service acquired or goods imported to improve the capital real property, to the extent that the price paid for those acquisitions or importations is included in determining the adjusted cost base of the capital real property for income tax purposes (or would be included if the owner of the property were a taxpayer under the Income Tax Act).

If you are a GST/HST registrant, the ITC you can claim for an improvement to capital real property is based on the extent you were using the real property in your commercial activities at the time you last acquired the real property. This means the ITC is based on the use of the real property in your commercial activities, not on the use of the improvement itself in your commercial activities.

However, if you are a GST/HST registrant who is an individual, you cannot claim an ITC for an improvement to capital real property if you last acquired the real property primarily for your personal use and enjoyment or that of a relative, either individually or in combination.

Change-in-use rules for capital real property

Corporations and partnerships

The following rules apply to corporations and partnerships that are GST/HST registrants. They also apply to certain capital real property of a PSB that has made an election to treat certain otherwise exempt supplies of that property as taxable.

If you are a corporation, a partnership, or a PSB that has made an election as discussed above, and you begin to use, or you increase your use of, capital real property in your commercial activities, you may be able to claim an ITC. If you decrease your use of or stop using capital real property in your commercial activities, you generally have to repay all or part of the ITC you previously claimed or were entitled to claim.

If you change your use of capital real property, any ITC you may be entitled to claim or any amount you have to repay is calculated based on the basic tax content of the property at the time of the change-in-use (see Calculating the basic tax content).

Beginning use in commercial activities

If you own capital real property that you do not use in your commercial activities, you would not have been entitled to claim any ITCs when you last acquired the property. However, if you begin to use that property more than 10% in your commercial activities, you are considered to have purchased the real property at that time and, unless the purchase is exempt, to have paid the GST/HST on the purchase equal to the basic tax content of the property at that time. As a result, you can claim an ITC equal to the basic tax content of the property multiplied by the percentage of use of the property in your commercial activities.

Note
If you become a registrant on the same day that you begin to use the property in your commercial activities, see New registrants for the rules that apply on becoming a registrant.

Increasing use in commercial activities

When you increase the percentage of use of capital real property in your commercial activities by 10% or more, you are considered to have purchased the real property to the extent you increased the use by and, unless the purchase is exempt, to have paid the GST/HST equal to the basic tax content of the property multiplied by the percentage of the increase-in-use in commercial activities. As a result, you can claim an ITC equal to the GST/HST you are considered to have paid.

Note
If you increase the use in your commercial activities to 90% or more, you are considered to be using the property 100% in your commercial activities.

Decreasing use in commercial activities

When you decrease the use of capital real property in your commercial activities by 10% or more (without stopping its use in those activities), you are considered to have sold the property to the extent you decreased the use by, and, unless the sale is exempt, to have collected the GST/HST on the part of the property that you are no longer using in your commercial activities.

To calculate the amount of the GST/HST you are considered to have collected, multiply the basic tax content of the property at the time you change the use by the percentage of the decrease-in-use in your commercial activities.

Stopping use in commercial activities

When you stop using capital real property for commercial activities (that is, when you reduce the use in commercial activities to 10% or less) and you begin to use the property 90% or more for non-commercial activities, we consider you to have sold the property and, unless the sale is exempt, to have collected the GST/HST on this sale.

The GST/HST that you are considered to have collected is equal to the basic tax content of the property. As a result, you have to include the amount of the basic tax content in your net tax calculation on your GST/HST return for the reporting period in which the change-in-use occurs.

For more information, see GST/HST Memorandum 19.4.2, Commercial Real Property - Deemed Supplies, or call 1-800-959-8287.

Individuals

The following rules apply to individuals who are GST/HST registrants.

If you are an individual and you begin to use, or you increase your use of, capital real property in your commercial activities, you may be considered to have purchased the property at that time and to have paid the GST/HST. Therefore, you may be entitled to claim an ITC. If you decrease your use of or stop using capital real property in your commercial activities, or you begin to use it primarily for your or a relative's personal use and enjoyment either individually or in combination, you generally have to repay all or part of the ITC you previously claimed or were entitled to claim.

If you begin to use or increase your use of capital real property in your commercial activities, any ITC you are entitled to claim is based on the basic tax content of the property at the time of the change-in-use. If you decrease or stop your use of capital real property in your commercial activities, any GST/HST you have to repay is based on the fair market value or the basic tax content of the property at the time of the change-in-use, depending on whether there is an increase in personal use or in the use in exempt activities. For more information on the basic tax content calculation, see Calculating the basic tax content.

Beginning use in commercial activities

If you are an individual and you own capital real property that you use primarily (more than 50%) for your or a relative's personal use and enjoyment, either individually or in combination, or if you do not use the property in commercial activities (10% or less), you would not have been entitled to claim an ITC when you last acquired the property. However, if you begin to use that property more than 10% in your commercial activities and you do not use the property primarily for such personal use, you are considered to have purchased the property at that time and, unless the purchase is exempt, to have paid the GST/HST on the purchase. If you are considered to have paid the GST/HST you can claim an ITC equal to the basic tax content of the property at the time you begin using it in commercial activities multiplied by the percentage of use of the property in your commercial activities.

Note
If you become a registrant on the same day that you begin to use the property in your commercial activities, see New registrants for the rules that apply on becoming a registrant.

Increasing use in commercial activities

When you increase the percentage of use of capital real property in your commercial activities by 10% or more, and you are not using the property primarily for your or a relative's personal use and enjoyment, either individually or in combination, you are considered to have purchased the property to that extent and, unless the purchase is exempt, to have paid the GST/HST equal to the basic tax content of the property multiplied by the percentage of the increase-in-use in commercial activities. As a result, you can claim an ITC equal to the GST/HST you are considered to have paid.

Note
If you increase the use in your commercial activities to 90% or more, you are considered to be using the property 100% in your commercial activities.

Decreasing use in commercial activities

When you decrease the use of capital real property in your commercial activities by 10% or more (without stopping its use in those activities) and you do not begin to use it primarily (more than 50%) for your or your relative’s personal use and enjoyment, either individually or in combination, you are considered to have sold the property to the extent that you reduced the use in commercial activities. Unless the sale is exempt, you are considered to have collected the GST/HST on the part of the property that you are no longer using in your commercial activities.

Note
If you decrease the property use in your commercial activities to 10% or less, you are considered to have stopped using the property in your commercial activities (see Stopping use in commercial activities.

When you decrease the use in your commercial activities, you have to use the following formula to calculate the amount of the GST/HST you are considered to have collected:

(A × B ) – C

A	is the basic tax content of the property at the time of the change-in-use;
B	is the percentage that you reduced the use of the property in your commercial activities; and
C	is the amount of any GST/HST that you are considered to have collected on the fair market value of the property, or a part of the property, because you appropriated the property (or part) that was used as capital property in your business or commercial activities for your or your relative’s personal use and enjoyment, including residential use (see Changing the use of the property to personal use).

Changing the use of the property to personal use

If you begin using the property primarily for your or your relative’s personal use and enjoyment, either individually or in combination, you are considered to have stopped using the property in your commercial activities and to have sold the property, or a part of the property, and to have collected the GST/HST on that sale.

The GST/HST that you are considered to have collected is equal to the GST/HST calculated on the fair market value of the property where you appropriated the property to begin using it for personal use.