Zero-Rated Supplies The supply of certain types of property or services, defined in the ETA as a “zero-rated supply,” is treated as a taxable supply, but with the rate of tax being 0% (i.e., no GST is charged). The following are the principal categories of zero-rated supplies: – supplies of most forms of property or services for export; – supplies of prescription drugs and basic groceries; – supplies of certain agricultural products; and – supplies of most forms of financial services to a non- resident. Input Tax Credits In general terms, a registrant engaged exclusively in making taxable supplies (including zero-rated supplies) is entitled to claim ITCs equal to all GST that the registrant has paid in connection with property or services acquired for consumption, use or supply in its commercial activities. Conversely, a supplier that is engaged exclusively in making exempt supplies is not entitled to claim ITCs. A registrant that makes both exempt and taxable supplies must allocate its GST expense reasonably between the two activities, and is generally permitted to claim ITCs only for the GST expense allocated to the making of taxable supplies.
A person, whether resident in Canada or non-resident, that in the course of commercial activities makes a supply (defined in the ETA as a “taxable supply”) of property or a service in Canada is generally required to register for the GST unless the person’s aggregate annual worldwide taxable supplies do not exceed $30,000 (taxable supplies of related parties must be considered for these purposes). Under these rules, any non-resident that carries on business in Canada, makes a taxable supply in Canada and has worldwide non-exempt sales of more than $30,000 (including non-Canadian sales) will generally be required to register for the GST. For the purposes of the ETA, “person” is defined broadly to include an individual, a corporation, a trust and a partnership. GST registration requirements for non-residents were further broadened effective July 1, 2021, with the introduction of a second type of GST registration that targets taxable supplies to non-GST registered Canadian residents, including in circumstances in which the non-resident supplier does not carry on business or have a permanent establishment in Canada. Exempt Supplies The supply of certain types of property and services, defined in the ETA as an “exempt supply,” is expressly exempted from the GST. The following are the most common types of exempt supplies: – supplies of financial services (such as loans or securities transactions, including the sale or issuance of shares, and some related services); – supplies (including sales and leases) of used residential real estate; – certain supplies made by Canadian charities or other non-profit entities; and – supplies of most medical and dental services.
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Doing Business in Canada
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