GST/HST Quick Method
TheQuickMethodisasimplifiedaccountingoption availabletohelpsmallbusinessescalculatetheirnet taxforGST/HSTpurposes.ThismethodreducespaperworkandmakesiteasiertocalculateGST/HST remittancesandfileGST/HSTreturnsbecauseiteliminatesthe needtoreporttheactualGST/HSTpaid on mostpurchases.
When youusetheQuickMethod,youstillchargeyourcustomerstheGST/HSTattheapplicablerate(see thechartGST/HSTRatesbelow).However,you onlyneedtoremitaportionofthatGST/HSTtothe CanadaRevenueAgencywhenyouprepare yourGSTreturn.Thepartofthetaxthat youkeepunderthe QuickMethodaccountsfortheapproximatevalueoftheinputtaxcredits(ITCs) youwould haveclaimed forGST/HSTpaidon yourpurchasesifyouhadused theRegularMethodtoprepare yourGSTreturn. HoweverundertheQuickMethod,youareallowed toclaimITCsonpurchasesofrealproperty,capital property(suchascomputers,equipmentandvehicles),eligiblecapitalproperty, andimprovementsto thoseproperties.
Forexample,let’sassumeABCCompany’sofficeislocatedinBritishColumbiaandalloftheirsalesare madetocustomerslocatedinBritishColumbiaandtheyhaveelectedtousetheQuickMethodin2014 (seeWhocanmakethiselection?below).TocalculatetheamountofGST/HSTtoremitontheirGST return,they would multiplythetotalamountinvoiced (Sales+GST/HST)bytheQuickMethod remittanceratesthatappliedintheirsituation(seethechartWhataremyQuickMethodremittance rates?below).
IfABCCompanyhadbilled$100,000 forservicestheyprovided in2014, theywouldcharge5%GST (becausetheirofficeislocatedin BC and their customers are all locatedinBC)andwouldcollect
$105,000in totalfromtheircustomers. Iftheyhadnotpurchasedanyreal,capital,oreligible capital
property in 2015, thenet taxowing on their2014GSTreturn,wouldbecalculatedasfollows:
Totalbilled in2014(Sales+GST/HST) | $105,000 | Line101 |
ApplicableQuickMethodRemittanceRate | x 3.6% |
|
| $ 3,780 |
|
Less1% Creditonthe 1st$30000blled | (300) |
|
TotalGST/HSTCollected | $ 3,480 | Line103 |
GST/HSTPaid | 0 | Line106 |
NetTaxOwing | $ 3,480 | Line109 |
IfABCCompanyhadusedtheRegularMethodand theyhadnotpaidanyGST/HSTonpurchasesduring the year,theywouldhave reportedthefollowing ontheir2014GSTreturn:
TotalSalesin2014(notincludingGST/HST) | $100,000 | Line101 |
ApplicableGST/HSTRate | x 5% |
|
TotalGST/HSTCollected | $ 5,000 | Line103 |
GST/HSTPaid | 0 | Line106 |
NetTaxOwing | $ 5,000 | Line109 |
Byelecting tousetheQuickMethod, thecompanyhassaved$1,520in2014.
Who can make this election?
YoucanusetheQuickMethodifyou meetallofthefollowingconditions:
· youhavebeeninbusinesscontinuouslythroughoutthe year(365days)OR youareanew registrantand youcanreasonablyexpect yourworldwidetaxablesuppliestobe$400,000orless in yourfirst full yearofbusiness(thelimitwas$200,000prior toJanuary1,2013);
· youdidnotrevokeanelectionfor theQuickMethodduringthat 365-dayperiod;
· youarenotapersonlistedunderExceptions,below; and
· yourannualworldwidetaxablesupplies(includingGST/HSTandzero-ratedsupplies)including thoseofanyassociatedcompanyarenot morethan$400,000(thelimitwas $200,000priorto January 1,2013).Whenyoucalculate yourannualworldwidetaxablesupplies,excludesupplies offinancialservicesandsalesofrealproperty,capitalproperty,andeligiblecapitalproperty.
Exceptions
ThefollowingpersonscannotusetheQuickMethod:
- · accountantsorbookkeepers;
- · financialconsultants;
- · lawyers(orlawoffices);
- · actuaries;
- · notariespublic;
- · listedfinancialinstitutions;
- · auditservices;
- · taxreturnpreparersortaxconsultants;
- · municipalities,orlocalauthoritiesdesignatedas municipalities;
- · publiccolleges,schoolauthorities,oruniversities,establishedandoperatednot forprofit;
- · hospitalauthorities;
- · charities;and
- · non-profitorganizationswithatleast40%governmentfunding in the year
HowdoyouelecttousetheQuickMethod?
ToelecttousetheQuickMethod,completeandsendFormGST74-ElectionandRevocationofan ElectiontoUsetheQuickMethodof Accounting, to your tax services office.
PLEASE NOTE
Thisisabriefsummaryof theQuickMethodrulesfordiscussionpurposesonly.Forthecompleterules, please refer toRC4058 QuickMethodofAccountingforGST/HST
http://www.cra-arc.gc.ca/E/pub/gp/rc4058/README.html.
Pleasecontactourofficeifyouwouldliketodiscusshowtherulesapply to your specificsituation.
GST/HST Rates | |
BritishColumbia,Alberta,Saskatchewan,Manitoba,Quebec,NorthwestTerritories, NunavutandYukon |
GSTat5% |
NovaScotia | HSTat15% |
Ontario,NewBrunswick,NewfoundlandandLabrador | HSTat13% |
PrinceEdwardIsland | HSTat14% |
Remittancerates for businesses that PROVIDE SERVICES |
| ||||||
|
| Yourofficeislocatedin: |
| ||||
|
| BritishColumbia,Alberta, Saskatchewan,Manitoba, Quebec,NorthwestTerritories, NunavutandYukon |
NovaScotia | Ontario,New Brunswick, Newfoundland andLabrador |
Prince Edward Island |
| |
Yourcustomerislocatedin: | BritishColumbia, Alberta,Saskatchewan, Manitoba,Quebec, NorthwestTerritories, NunavutandYukon |
3.6% |
1.4% |
1.8% |
1.6% | ||
NovaScotia | 12.0% | 10.0% | 10.4% | 10.2% | |||
Ontario,New Brunswick, Newfoundlandand Labrador |
10.5% |
8.4% |
8.8% |
8.6% | |||
PrinceEdwardIsland | 11.3% | 9.2% | 9.6% | 9.4% | |||
Remittancerates for businesses that PURCHASE GOODS FOR RESALE | |||||
|
| Yourofficeislocatedin: | |||
|
| BritishColumbia, Alberta,Saskatchewan, Manitoba,Quebec, NorthwestTerritories, NunavutandYukon |
NovaScotia |
Ontario,New Brunswick, Newfoundland andLabrador |
Prince Edward Island |
Yourcustomeris locatedin: | BritishColumbia,Alberta, Saskatchewan,Manitoba, Quebec,Northwest Territories,Nunavutand Yukon |
1.8% |
0%(and 4.0%credit) |
0%(and2.8% credit) |
0%(and 3.4%credit) |
NovaScotia | 10.4% | 5.0% | 6.1% | 5.6% | |
Ontario,NewBrunswick, NewfoundlandandLabrador |
8.8% |
3.3% |
4.4% |
3.9% | |
PrinceEdwardIsland | 9.6% | 4.2% | 5.3% | 4.7% |