When the Goods and Services Tax (GST) was introduced, one of our major concerns for members was the excessive cost of compliance, especially for smaller firms. Our research told us that a large part of that compliance cost was the time and effort associated with claiming input tax credits, which is the GST/HST paid on goods and services needed to run the business.
Thanks to our fighting, we have secured two important victories for you:
- The Quick Method of Accounting for GST/HST, which can help reduce the time and efforts spent on GST/HST compliance.
- The Simplified Method of Claiming Input Tax Credits, which uses a single formula to calculate input tax credits. It allows you to save $500 to $1,500 every year in time, efforts and costs associated with compliance.
Simplified Method to Claim Input Tax Credits
Claiming input tax credits used to be onerous because the calculations were made on an invoice-by-invoice basis, and the GST had to be separated from provincial sales taxes (except in provinces that have a Harmonized Sales Tax) and items like gratuities.
The simplified method uses a single formula to calculate input tax credits. You may qualify to use the simplified method if:
- Your annual worldwide revenues from taxable goods and services (including those of your associates) were $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 were $500,000 or less, not including goodwill, zero-rated financial services, or sales of capital real property.
- You have $2-million or less in taxable purchases made in Canada in your last fiscal year, not including zero-rated purchases, but including purchases imported into Canada or brought into a participating province.
Review CRA’s Simplified method to claim input tax credits for more information. In Quebec, refer to Revenue Quebec’s General Information Concerning the QST and the GST/HST.
Quick Method of Accounting for GST/HST remittances
The Quick Method of Accounting for GST/HST can reduce the time and effort smaller businesses spend on GST/HST compliance. If your business is eligible to use this method, you calculate your remittance without having to record GST/HST separately on most purchases. The Quick Method is also available for Quebec businesses when remitting the Quebec Sales Tax (QST).
In order to be allowed to use this method, your total annual taxable sales must not exceed $200,000 (including GST) and must not exceed $215,000 (GST and QST included).
NB: if you choose this method, you do not have to claim input tax credits or input tax refunds because they are already accounted for.
For more detailed information on this method, see the CRA guide. Members in Quebec should refer to Revenue Quebec’s website.
You will have to determine whether the Quick Method or regular method is more beneficial for you to use. Should you decide to use the Quick Method, you must request approval from CRA or Revenue Quebec by completing the appropriate form.
And did you know that you can make your GST/HST payments online? Paying online is secure, convenient and easy. Find out more at Canada.ca/payments.