Tax registration (GST, QST)
Anyone doing business in Canada is subject to a tax obligation:tax registration (GST, QST). Why is this compulsory? Is the process tedious? How do I register for GST and QST taxes? Before you get started, here’s what you need to know about these notorious tax constraints.
Registering for taxes (GST, QST)
Tax registration is mandatory, but under what circumstances?
When should I register for taxes (GST, QST)?
Taxregistration is mandatory for all businesses in Canada. The deadline for registration varies according to your project: GST registration or QST registration. GST (Goods and Services Tax ) registration must be completed before the 30th day following the day on which the invoice for the first taxable service in Canada is sent. GST collection also begins as soon as you register.
QST (Quebec Sales Tax ) registration takes place before the first taxable service is provided in Quebec. Consequently, the company collects the tax as soon as it registers.
What are the advantages of registering for taxes (GST, QST)?
GST and QST tax registration offers a number of advantages, including tax compliance. It confirms your company’s compliance with tax obligations. It regulates your tax situation and helps you build a good image, essential to maintaining a healthy, long-term relationship with customers and government agencies.
Your company’s credibility is also at stake. Registration forges your legitimacy, strengthens your reputation and underlines your integrity. Your fiscal transparency makes it easier to establish a relationship of trust with your customers, suppliers and business partners.
Registration opens the doors to public procurement markets, multiplying your business opportunities.
The operation speeds up tax collection and remittance procedures, given that every company is obliged to remit taxes to the tax authorities on time.
Finally, the operation allows you to reclaim the Input Tax Credit (ITC). This is a system for reclaiming all or part of taxes on goods and services. It avoids double taxation of sales tax.
What are the requirements for tax registration (GST, QST)?
Registration unlocks a series of regulated obligations. Canada ‘s Excise Tax Act (ETA ) is a federal statute. Legal sections 240 to 272 of S.C. 1990, c. 45 set out the obligations relating to GST tax registration.
The provincial Act respecting the Québec sales tax (R.S.Q., c. T-0.1) sets out the obligations for QST registration. Specifically, legal sections 23 to 29 impose, among other things, periodic reporting obligations and specify tax payment terms.
Tax registration (GST, QST): for whom?
The law specifies which companies are and are not required to register for taxes (GST, QST).
The legal obligation to register
By way of reminder, a person is engaged in a commercial activity when he or she operates a business, manages a commercial operation, carries out an adventure or concern and supplies real estate, according to the law.
Under section 240 of the Excise Tax Act, registration is mandatory for a person or company offering a taxable supply in Canada, in the course of its commercial activities. An exception to this rule applies to small suppliers with less than $30,000 in taxable supplies.
However, the law does provide for certain situations in which registration in GST and QST files is possible. Section 240(3) of the ETA allows for elective registration for persons carrying on a commercial activity in Canada, regardless of the amount of taxable supplies made.
Persons concerned by GST and QST tax registration
As a general rule, all persons engaged in commercial activities must register for GST and QST. Registration is compulsory for those who record total taxable supplies in excess of $30, 000 during a calendar quarter, or for the 4 preceding calendar quarters as a whole.
Regardless of total annual taxable sales, registration is also mandatory for :
- who operate a cab business;
- who do not reside in Quebec or Canada, but who receive admission fees for activities or events in Quebec or the rest of Canada.
In addition, registration in the QST file is mandatory for persons who carry out :
- tobacco retailing;
- sale or rental of new tires;
- sale or rental of road vehicles for a period of 12 months or more;
- retail sale of fuel;
- sale of alcoholic beverages, except for holders of a reunion permit.
QST registration is mandatory whether or not the person is registered for GST.
Exclusions from tax registration
The registration rules are set out in the publication ” Inscription aux fichiers de Revenu Québec (IN-202) “. The entities excluded from the obligation to register for taxes (GST, QST) are :
- businesses with no reasonable expectation of profit;
- companies offering tax-exempt products and services.
These generally include individuals, personal trusts and partnerships with individual partners.
How do I register for taxes (GST, QST)?
Most companies register online, but you can also register through other channels.
Online registration takes place on the Revenu Québec website. To register for GST and QST files, use :
- the “Start-up registration” service if you are not yet registered with Revenu Québec;
- the Revenu Québec file registration service if you are already registered in a Revenu Québec file.
Complete the “Application for registration (LM-1)” form.
Other alternatives to online registration
Alternatively, you can register by telephone at 514 873-4692 for Montreal or 418 659-4692 for Quebec.
A final option invites you to complete the paper registration form and mail it to “Direction principale des relations avec la clientèle des entreprises de Revenu Québec, C. P. 3000, succursale Place-Desjardins, Montréal (Québec) H5B 1A4”. This address applies to the Montérégie, Laurentides, Montréal and Laval regions.
Companies from other regions should send the form to “Direction principale des relations avec la clientèle des entreprises, Revenu Québec, 3800 rue de Marly, Québec, G1X4A5”.
What information should I provide when registering?
Registration for taxes (GST, QST) requires certain information:
- social Insurance Number or SIN ;
- quebec Business Number from the Registraire des entreprises;
- if applicable, the company’s trade name;
- canada Revenue Agency business number, if applicable;
- if applicable, the company’s main business activity and any secondary activities;
- the date on which the company began operations;
- total taxable sales envisaged by the company over the next 12 months;
- the company’s home address;
- company telephone number;
- correspondence address.
Persons registering on behalf of a third party add to this information: their surname, first names and the last 3 digits of their social insurance numbers.
What are the penalties for failing to register for taxes (GST, QST)?
Sections 323 to 326 of Canada’s Excise Tax Act set out the sanctions and penalties for non-compliance with GST tax registration requirements. Similarly, sections 90 to 94 of the Act respecting the Québec sales tax set out the provisions and consequences of non-compliance with the obligation to register for QST taxes.
Collection procedures apply to defaulting businesses to recover unpaid taxes. These include seizure of assets, withdrawal of tax privileges, legal action or seizure of bank accounts by tax authorities.
Non-registered taxpayers must pay interest on unpaid taxes and additional penalties.
The director, representative or officer of the defaulting company is personally liable for the company’s tax debts.
In addition, theCanada Revenue Agency and Revenu Québec impose fines equivalent to the amount of unpaid taxes and the duration of non-registration.
Registering for taxes (GST, QST) is an essential step for any self-respecting business in Canada. Complex administrative procedures can be a hindrance to management. In such cases, a business lawyer is essential. He or she will guide you through the process and assist you in fulfilling your tax obligations.