GST/HST - Penalties and interest
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- How and when does penalties apply?
- How and when interest applies (including instalment interest)?
- How do you cancel or waive penalties and interest?
How and when does penalties apply?
Penalties may apply in different circumstances.
|Type of penalty||When it applies||Amount charged|
|Failure to file||Any return you file late unless:
||A + (B × C)
A is 1% of the amount owing;
B is 25% of A; and
C is the number of months the return is overdue, to a maximum of 12 months.
|Demand to file||If you receive a demand to file and do not do so.||$250|
|Failure to file electronically||If you are required to file electronically and do not do so. See Mandatory electronic filing of the GST/HST return (GST34).||$100 for the initial return not filed electronically;
$250 for each following return not filed electronically.
|Failure to accurately report information||For electronically filed returns:
The amounts include:
|Generally 5% of the amount plus 1% per month of the difference between what is reported and what should have been reported, until the amounts are corrected (to a maximum of 10%).|
You cannot claim an income tax deduction for any penalty paid or payable for failing to file a GST/HST return.
If you are a financial institution who is also required to file Form GST111, Financial Institution GST/HST Annual Information Return, there are additional penalties associated with failures to properly report information on that return. Penalties for non-compliance accumulate and can be as much as $1,000 for each failure, unless due diligence was exercised when the amount was reported on the return. For more information, see Guide RC4419, Financial Institution GST/HST Annual Information Return.
How and when interest applies?
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.
Interest is charged on:
- any overdue balance owing on a 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, see My Business Account.
You cannot claim an income tax deduction for arrears interest paid or payable for outstanding GST/HST amounts.
If the instalment payments you make are equal to ¼ 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.
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; or
- 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).
Instalment 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.
Your net tax for the 2015 fiscal year was $4,000. You estimate that your net tax for 2016 will be $3,200. You choose to make quarterly instalments of $800 each based on your estimate and you paid each one by its due date. At the end of 2016, you calculate your net tax and it is actually $5,500. Since your 2016 instalment payments were less than the required amount, you will be charged instalment interest. You have to pay the balance of $2,300 plus instalment interest. If at the end of 2016 your net tax is actually $3,200, then you will not be charged instalment interest.
Your net tax for the 2015 fiscal year was $4,000. You estimate that your net tax for 2016 will be $5,500. You choose to make the required instalment payments of $1000 based on the 2015 year. At the end of 2016, your net tax is actually $5,500. Since your instalment payments of $1,000 were correct (equal to ¼ of your net tax for 2015), and on time, you will not be charged instalment interest. You have to pay the balance of $1,500 by the due date for your net tax for the fiscal year.
How do you cancel or waive penalties and interest?
The Canada Revenue Agency (CRA) administers legislation that gives the Minister of National Revenue discretion to cancel or waive penalties or interest. This legislation is commonly called the taxpayer relief provisions.
For more information about relief from penalties or interest, go to Cancel or waive penalties or interest.
- Mandatory electronic filing of the GST/HST return (GST34)
- Paying the GST/HST (including instalment payments)
- Correcting a GST/HST return
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