Sales and Other Taxes
In the next series of blogs, we will provide a summary of the federal government and most of the provinces have sales tax regimes.
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The federal government and most of the provinces have sales tax regimes.
Federal Goods and Services Tax
The federal government imposes a 5% multi-stage, value-added tax called the Goods and Services Tax (GST), which applies to taxable supplies (e.g., supplies of most types of property, including intangibles and real property as well as services) made in Canada. Certain types of property and services, including most financial services, are exempt for GST purposes and certain supplies, defined as zero-rated supplies, which include exports, are taxed at a rate of 0%.
GST is also levied on taxable goods imported into Canada, and there are self-assessment obligations on certain purchasers of imported services and intangibles.
The GST is a value-added tax and it applies at each stage of the production and distribution chain. Generally, businesses making taxable supplies of property and services must register for, collect and remit the applicable GST on their supplies made in Canada. While GST applies to every transaction throughout the distribution chain, it is imposed on the ultimate consumer; accordingly, businesses involved in commercial activities are entitled to recover the GST they pay through an input tax credit mechanism.
It is not always easy to determine whether supplies made to or by non-residents of Canada attract GST; accordingly, consideration of specific rules is required. For example, whether GST applies to recent e-commerce developments requires close examination.