It’s something you need to know when doing business in Canada: Do I need to charge GST to foreign clients? If you’re asking this question, you know that you need some solid advice about the various sales taxes. You need to understand how the Goods and Services Tax (GST) applies to non-residents who are doing business in Canada. This is a tax that is applied to most goods and services made in Canada, and it includes real property or personal property, too.
Do I need to charge GST to foreign clients? The answer comes from the Canadian Border Services Agency (CBSA). Gaining the right advice from the CBSA will help you to determine whether you should be charging GST to foreign clients on goods and services sold. Usually, goods which are exported outside Canada and services given to non-residents are 0-rated under the GST rules. Technically, they’re taxable, but the rate is 0%, which means that you don’t have to charge anything.
To determine whether you should be charging GST to foreign clients, you need to first determine their resident status. Let’s break it down:
Residency status is worked out according to the following criteria:
Social ties, like property, spouse and children in Canada, indicate that you are a resident in Canada. Any personnel of the government that have been posted abroad are treated as residents for GST purposes, too.
Anyone who may fit into the category of partnership, trust, estate and even a corporation are considered to be persons other than individuals, which means that the GST rules are different. Goods and Services Tax applies to those who are:
When there are residents that are considered to be non-residents based on any of these factors, they still may be considered as Canadian due to activities that are carried out through a permanent establishment. A permanent establishment is defined as:
Whether Goods and Services Tax applies depends on the goods that you are selling. Does your business fit an exception? This means you might not have to remit or charge a GST or HST rate. There are two possible exceptions to the rules, and these are:
Exports, medical devices and basic groceries are zero-rated goods and things like music lessons or childcare are considered exempt, which means no GST/HST rates need to be charged.
Small suppliers are classed as such based on how much money the business makes over the course of a year. Small suppliers are qualified if the total taxable revenues - before expenses - total $30,000 or less in a year, as told by the Canada Revenue Agency.
If the first exception does not apply to you, and you make over $30,000 per year, you must get registered for GST and charge it along with HST rates. There are exceptions to these exceptions, too, which is why the help of the right company can help you to wade through the jargon. As an example, taxi operators and non-resident performed must charge GST and HST rates despite being small suppliers. Some still get registered for GST due to the possible tax benefits.
There are supplies that are considered exempt from GST/HST rates, and if you make these supplies, you don't have to charge GST to your customers. However, you also won’t be able to input tax credits on purchases that you make. The Excise Tax Act lists the supply rules and exempt supplies, so checking to see if any of these apply to your business is a smart decision. Some examples of supplies exempt from Goods and Services Tax include:
If you are choosing ship taxable goods to another province or territory, you should be charging the sales tax applicable to that province or territory. Sales taxes vary by province, for example:
You must register for and collect PST if supplying goods here. Otherwise, the customer must remit PST whenever out of province purchases are taxable. GST must also be collected.
You’ll find that there are a few provinces that just require GST. Territories that only charge GST include:
In the above provinces, the GST is 5%.
Those who qualify as a small supplier won’t have to register for GST or HST rates and this includes business owners who have less than $30,000 each year.
You are responsible for charging and collecting sales tax as a small business owner whenever you provide goods and services to customers. Other than Goods and Services Tax (GST), there is a Provincial Sales Tax (PST) that may be charged. Along with Harmonized Sales Tax (HST), you have the trifecta of taxes in Canada. Which tax you pay depends on the location of your business.
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I am a small business that sells coffee online and I make less than $30,000 in Ontario. If I sell to customers in Sweden or other Europeans countries, do I have to charge taxes?
as i understood , if you customer is not in Canada , you don't have to charge taxes on your invoice, but if you make more than 30.000 CADs ,even your customer is not in Canada you have to register the GST/HST
We are an Ontario-Canada Company. We have a Canadian customer that is also a registered Ontario Company. This company arranges their own transport Company, pick up product from our Ontario plant and ship to their Company in NY state. We charge the 13% Harmonized Sales Tax on our invoice which customer thinks we should not charged. Who is correct ?
I am a freelancer in Canada, and I sell my consultation services to clients who are based in European Union - do I have to include HST in my invoices? Does it matter is my annual profits exceed or don't exceed 30K?
Alice, I am in the same boat. Did you ever receive a reply to the inquiry?
Hi I have an online retail business based in canada and I currently only ship to residents in canada. I want to start shipping internationally but I am unsure what taxes I should be charging the customers based on where they live. For example I want to start allowing U.S residents to purchase, do I charge them Canada tax rates or do I have to tax them their states tax rate?
Each state has an economic nexus law now meaning after you ship more than a prescribed number of goods or total dollar value to their state you need to apply to collect tax and remit to that state. Look up economic nexus laws by state, its convoluded at best, but small businesses likely wont reach the thresholds. I still dont have an answer for small volume ecommerce canadian companies and if they need to collect GST on foreign customers. If thats the case and you reach the state level nexus threshold, are we now double taxing customers to pay both governments? Idk
I run a virtual admin business from Canada and have a US client. Do I charge HST for my services?