Calculate Goods and Services Tax and Harmonized Sales Tax on Canadian Dollar (CAD)
Canada operates a comprehensive sales tax system consisting of the Goods and Services Tax (GST) and the Harmonized Sales Tax (HST). The GST is a federal tax applied at 5% across all provinces and territories. In participating provinces, the HST combines the federal GST with provincial sales tax into a single harmonized rate. The Canada Revenue Agency (CRA) administers both taxes, ensuring consistent collection and compliance across the country while supporting federal and provincial revenue needs.
The Canadian Dollar (CAD), commonly denoted as C$ or CAD, is the official currency of Canada. All GST and HST calculations within Canada are conducted in CAD. For businesses dealing with foreign currencies, conversion to CAD is required using appropriate exchange rates provided by the Bank of Canada. The exchange rate used should typically be the rate prevailing on the date of supply or transaction to ensure accurate tax calculation and compliance with Canadian tax regulations.
Canada's tax system varies significantly by province and territory. HST provinces (Ontario at 13%, New Brunswick, Nova Scotia, and Newfoundland and Labrador at 15%, and Prince Edward Island at 14%) have harmonized their provincial sales tax with the federal GST. Non-HST provinces apply the 5% GST plus separate provincial sales tax (PST) or Quebec Sales Tax (QST). This variation requires businesses to understand the specific tax obligations in each jurisdiction where they operate.
Canadian businesses with annual worldwide taxable supplies exceeding $30,000 in any four consecutive calendar quarters must register for GST/HST. Businesses below this threshold can register voluntarily, which allows them to claim input tax credits (ITCs) on business purchases. Non-resident businesses may also need to register if they supply taxable goods or services in Canada, ensuring that all commercial activities are subject to appropriate tax collection.
The ITC system allows GST/HST registrants to recover the tax paid on business purchases and expenses. This mechanism ensures that GST/HST is ultimately paid by the final consumer rather than being a cost to businesses in the supply chain. To claim ITCs, businesses must obtain proper documentation, use purchases for commercial activities, and meet specific timing requirements. The ITC system is fundamental to maintaining the efficiency and neutrality of Canada's consumption tax system.
Canada's GST/HST system includes zero-rated supplies (taxable at 0%) such as basic groceries, prescription drugs, medical devices, and exports. Exempt supplies include most health care and educational services, financial services, and residential rent. Understanding these categories is crucial for businesses to correctly apply tax rates and claim appropriate ITCs. Zero-rated supplies allow ITC claims, while exempt supplies generally do not.
Canada has implemented GST/HST on digital services provided by non-resident suppliers to Canadian consumers. This includes streaming services, digital downloads, online advertising, and e-commerce platforms. Non-resident digital service providers must register for GST/HST if their Canadian revenue exceeds $30,000, ensuring tax neutrality between domestic and foreign digital service providers while protecting Canadian businesses from unfair competition.
GST/HST registrants must file returns and remit net tax owing to the CRA. Filing frequency depends on annual taxable supplies: monthly for businesses over $6 million, quarterly for those between $1.5-6 million, and annually for smaller businesses. Returns must be filed by specific deadlines, with penalties and interest applying to late filings and payments. Maintaining accurate records and understanding filing obligations are essential for compliance with Canadian tax law and avoiding costly penalties.
GST is the federal 5% tax applied in all provinces. HST combines federal GST with provincial sales tax into one harmonized rate (13-15%) in participating provinces: Ontario, New Brunswick, Nova Scotia, Newfoundland and Labrador, and Prince Edward Island.
You must register if your worldwide taxable supplies exceed $30,000 in any four consecutive calendar quarters. You can also register voluntarily below this threshold to claim input tax credits on business purchases.
For tax-exclusive prices: Tax = Price × Tax Rate%, Total = Price + Tax. For tax-inclusive prices: Tax = Price × Tax Rate ÷ (100 + Tax Rate), Net Price = Price - Tax.
ITCs allow registered businesses to recover GST/HST paid on business purchases and expenses. You can claim ITCs if you have proper documentation and use purchases for commercial activities, ensuring tax is ultimately paid by final consumers.
Filing frequency depends on annual taxable supplies: monthly (over $6M), quarterly ($1.5M-$6M), or annually (under $1.5M). Returns must be filed by specific deadlines to avoid penalties and interest charges.