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How to Register for Canada Vat

December 16, 2022

In Canada, the tax system is made up of direct and indirect taxes. The most common indirect tax is the VAT, but it's called the Goods and Services Tax (GST) in Canada.. VAT, also known as "Value Added Tax," is a type of tax charged to goods and services in many countries.

The Goods and Services Tax is Canada's federal equivalent of the VAT (GST). Furthermore, provincial sales taxes (PST or QST) are added on top of VAT in several regions.

 

Some provinces combine their provincial sales tax and the federal GST to create something they call the Harmonized Sales Tax (HST). Certain provinces in Canada have a GST or HST, and in order to collect it, companies need to register for VAT with the tax authorities.

There's a lot of variation in Canadian consumer tax rates. They range from 5% to 15%. Certain products are also exempt from VAT-style taxes.

Here’s how VAT is applied:

  • The Goods and Services Tax (GST) is a national tax levied by the federal government.

  • The federal value-added tax (VAT) and the provincial value-added tax (PST) are merged into the Harmonized Sales Tax (HST), which is levied at different rates.

  • The provinces and territories in Canada that levy the HST include Ontario, New Brunswick, Newfoundland and Labrador, Prince Edward Island, and Nova Scotia.

  • The QST, or Quebec Value-Added Tax, is the province of Quebec's own value-added tax.

  • The provinces of British Columbia, Saskatchewan, and Manitoba all collect their respective sales taxes separately.

Businesses and individuals must be registered for VAT in the province or territory in which they are doing business. This means that those paying the QST, for example, will have to register with their local tax office. Companies are required to register for the VAT, but they must collect the tax in their state of incorporation.

There are a handful of laws in Canada that actually address the issue of the value-added tax. One such law is the First Nations Goods and Services Tax Act, but other pieces of legislation also deal with things like requirements for registering your business.

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When Do You Register for VAT?

If a person (such as an individual, corporation, trust, or association) manufactures taxable goods in Canada and the value of its taxable goods and services manufactured inside or outside of Canada, including the taxable goods and services of any associated entities, exceeds 30,000 Canadian dollars (CAD) in the previous four calendar quarters or in a single calendar quarter, the person is required to register for and collect GST/HST.

There are special GST/HST rules that apply to certain entities. These include charities, taxi businesses, non-resident book and magazine publishers, and those who charge admission to events (e.g., concerts, shows, or seminars).

For QST reasons, the same guidelines apply.

For PST purposes, different regulations apply.

Is it possible to register for VAT, GST, and other indirect taxes voluntarily if your annual turnover is below the relevant registration threshold?

Yes, a non-resident company may soon choose to voluntarily register if the company meets certain requirements. These include the fact that the company is not required to register under general GST/HST rules and that they carry on business outside Canada in the ordinary course of their normal operations.

  • active in seeking out business for the company's supply of products destined for export to or delivery in Canada.

  • has signed a contract committing to the company's delivery of

    • of work that will be done in Canada

    • of intellectual property intended for use in Canada; this includes intellectual property related to Canadian real estate, Canadian commodities, and Canadian services.

Businesses that must get a VAT number in Canada:

Canada's Products and Services Tax (GST) and Harmonized Sales Tax (HST) are not available to businesses that provide VAT-exempt goods and services.

The firm must not be a small supplier, and the taxable products and services must be provided inside Canada in order to be eligible for VAT registration in Canada.

In Canada, only the following types of businesses need to register for GST/HST:

  • businesses in Canada that offer products and services subject to the value-added tax

  • incomes of more than $50,000 Canadian per year for nonprofits and government agencies;

  • businesses based outside of Canada who want to register for GST there;

Foreign Companies

To begin doing business in Canada, international firms often form a legal corporation in accordance with the Canadian company legislation of the province in which they want to operate.

If your company is based outside of Canada but you still want a business number, you may register for one by filling out the Non-Resident Business Number and Account Registration Web Form.

The fact that certain businesses that are not based in the country cannot register online is also noteworthy. When this is the case, registering for VAT in Canada may be done at any of the Tax Service Office's brick-and-mortar locations throughout the country.

In order to ensure that they address the correct office, international applicants should review the list of nations for which each office is responsible. For instance, businesses based in Albania or the Azores that aren't Nova Scotia residents may use the province's office.

The GST laws let non-resident corporations register freely for VAT in Canada. These may be registered in one of the following circumstances:

  • They order products or services that are shipped to or delivered in Canada;

  • They order products or services that are shipped to or delivered in Canada;

  • They have entered into agreements concerning the use of intangible and real property in Canada.

Local Businesses

A person or organization must register for VAT in Canada as soon as they begin making taxable supplies. It is important to note that Canadian trusts and organizations are also obliged to register for VAT if they offer products or services.

The organization or person is not required to register for VAT until it has made taxable sales of at least CAD 30,000 in a calendar quarter or fiscal year. If this sum is not met, the applicant may register voluntarily for GST, HST, or QST.

In Canada, there are additional regulations regarding VAT registration. These regulations apply to non-resident book and magazine merchants and publishers, charities, and taxi firms entering Canada for a short time.

What are the Canadian VAT Rates?

In Canada, the VAT is levied at varying rates, and the reporting procedures also vary. Here is what you must know about Canadian VAT rates and filings:

  • The GST rate is 5% (a lower rate of 0% is available for some commodities);

  • The HST rate ranges from 13% to 15% (with a reduced rate of 0%);

  • The QST rate is 9.975 percent.

  • The PST is imposed at rates ranging from 6% to 8%;

  • GST/HST/QST/PST returns may be filed monthly (12 times per year), quarterly (4 times per year), or annually.

When to File for VAT Returns

In general, for GST/HST and QST purposes, a business's reporting periods vary depending on the total annual revenue from taxable supplies made in Canada by the corporation and any related companies.

  • Annually, up to 1.5 million CAD

  • Quarterly: 1.5 million to 6 million CAD

  • Monthly: over 6 million CAD

Different provinces have distinct PST-related laws.

How to Register for Canadian VAT

Contact us for a free consultation about registering for Italian VAT. We can also help you decide whether you need to register with it!

Before you begin the registration process, you will need to collect the necessary paperwork:

  • GST/HST application form (GST Form RC1 or GST Form RC1A, depending on the circumstances)

  • Articles of incorporation

A non-resident business may also be required to complete a GST/HST assessment for non-residents and may choose to submit a request to maintain its documents and books outside of Canada.

In some instances, a non-resident firm may be obliged to file and provide security with the Canada Revenue Agency. In general, a non-resident firm without a permanent presence in Canada that applies voluntarily or is obliged to register is required to furnish such security. The amount of security may range from $5,000 to $1,000,000 CAD. Registration requirements for QST and PST are distinct.

It is wise to ask for specialized services in this regard because the VAT registration requirements vary between Canadian provinces and territories. Our Canadian agents can assist non-residents who require registered agent services. Contact us today!

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