Navigating HST in Canada can be a confusing task for small business owners and large corporate accountants alike. With constantly changing options, legislation, and credits, it can seem like you are always struggling to catch up with HST filing and HST payments.
Most small businesses in Canada will owe HST to the Canada Revenue Agency (CRA) after they file their HST return. Once you calculate your HST payable, it is important that you pay the balance within the relevant time frames to avoid incurring steep penalties and interest. But how do you pay HST to the CRA in the way that best suits your business?
The Accountor CPA team has your local tax experts for how to pay HST, HST payment deadlines, schedules, and more. Learn all the basics for HST payments from our professionals!
If you sell goods and services in Canada, you must charge your customers GST / HST. HST is Harmonized Sales Tax, which is used in five provinces: Ontario, Prince Edward Island, Newfoundland and Labrador, Nova Scotia, and New Brunswick.
Filing Your GST/HST Return With Accountor CPA
You must then remit or pay this collected HST to the government at the end of the tax year, minus expenses. The amount of HST payable that you must remit to the government when you file your HST tax return is net of any input tax credits (ITCs) for amounts of HST that you have paid on your purchases.
There are a few exceptions for businesses that do not need to charge HST to their customers or pay HST to the government on these services.
If your business does not fall into either of these two categories for exceptions, then you must charge your customers HST, file HST, and pay HST.
There are a number of important dates to keep in mind when determining how to pay HST for your business.
There are four filing periods and corresponding HST payment dates that your business may choose to use, depending on its business operations and size. These are monthly, quarterly, annually (December 31st year-end) and annually (custom year end). Your HST payment date is determined by which of these filing periods you follow.
These HST payment dates in the various filing periods are as follows:
If your due date is a Saturday, Sunday or public holiday recognized by the CRA, your payment is on time if it is received on the next business day.
As a corporation, you can choose which filing and HST payment date works for your company. If you are a sole proprietor, your HST payment deadline will be in line with your personal income tax.
It is important to choose a filing and payment period that suits your business. Most businesses choose to file and make HST payments on an annual or quarterly basis. If your corporation has a significant monthly revenue, it is often easier to pay HST monthly.
There are penalties associated with failure to file your HST return as well as additional penalties for if you miss an HST payment deadline. These penalties and interest will increase for as long as you owe a balance on your account.
If you owe a balance and you file a late return, the penalty is calculated using the following equation:
Where A is 1% of the amount owing, B is 25% of A, and C is the number of months the return is overdue, to a maximum of 12 months.
For example, if you owe $10 000 in HST and are 6 months late in making payment, in addition to the original $10 000, you would owe:
In addition to this penalty, the CRA will also charge interest on any overdue amount equal to the 90-day Treasury bill rate plus 4%. This is adjusted quarterly and rounded up to the nearest whole percentage. You cannot claim an income tax deduction for interest paid or payable for outstanding HST amounts.
These penalties and interest can add up quickly. This is why it is important to fully understand your HST payment obligations and know how to make an HST payment.
There are a few options for submitting your business’ HST payments, depending on your internal accounting and operations. Please note, payments of $50,000 or more must be paid electronically or at your financial institution. You are not eligible for the other possible options.
Our accountants always recommend making an online HST payment, no matter your business’ revenue. Paying HST online is a simple, straightforward process.
You can access the CRA’s My Payment electronic payment service online. This portal uses Interac Online to allow individuals and businesses to make their HST payments directly to the CRA from their online banking account. You are immediately provided with a receipt to print or email for your records.
You can also pay online directly through your online banking service. Set up a payee by looking for “Federal – GST/HST Payment – GST-P (GST-P)” in the payee list. Use your 15-digit business number as your CRA account number. Make the payment the same way you would pay any other bill through your online bank.
You also have the option to pay HST in quarterly installments. If you are an annual filer and your net tax for your previous fiscal year is $3,000 or more, you may have to make quarterly installment payments in the current fiscal year.
Your HST installment payment dates are within one month after the end of each of your fiscal quarters. For example, if you have a fiscal year end of December 31st, your HST installment payment due dates in 2024 will be as follows:
You must also report installment payments on your HST return when you file the following year.
HST installment payments are a good way to avoid paying a lump sum all at once, as this can be a hefty expense for some businesses. There are no penalties or interest charges associated with HST installment payments, unless you miss a deadline or miscalculate your payment. In that case, you can be charged installment interest at the 90-day Treasury bill rate plus 4% until the installed amount plus accrued interest is paid.
To make your HST installment payments, use RC160, Remittance Voucher – Interim Payments. This form is only available in a personalized printed format, so even if you have not received the remittance form on time, you must still make your payment on time. You can pay your installments the same way you would pay a lump sum, as mentioned above.
If your business is unable to make HST payments by the specified deadline, there are a few options they can take.
First, contact the CRA. You can work with them to create a payment arrangement agreement, which allows you to make partial payments on an agreed upon schedule, instead of the full payment amount in one lump sum. The CRA will consider a payment arrangement when you have shown that you have tried to pay your debt in full by either reducing your expenses or borrowing funds. You are responsible for paying on the agreed upon schedule and this payment arrangement may be subject to review as situations change.
This payment arrangement agreement differs from HST installments because it is a custom agreement decided on a case-by-case basis.
There are taxpayer relief provisions available to reduce penalties and interest on late payments and reduce the overall amount of tax you may owe. Visit the CRA for more information about these taxpayer relief provisions.
In extenuating circumstances, the Canada Revenue Agency will offer HST payment deferrals to Canadian businesses. Notably, this occurred in 2020 due to the coronavirus pandemic. In this case, all HST payments that were due between March 27th and June 30th 2020 were all accepted without penalty on or before June 30th 2020.
Businesses that were still unable to pay their HST even with this extension were encouraged to contact the CRA directly to request cancellation of penalties and interest or create a flexible payment arrangement.
It can be difficult to manage deadlines related to making HST payments for your small business. At Accountor CPA, we are dedicated to ensuring your filing and HST payments are done right and on time to eliminate penalties and hefty interest payments.
We help small businesses, SMEs, and corporations across Canada file their HST returns and make accurate HST payments to the CRA. Our tax planning and accounting services ensure you are prepared for all your financial obligations, year round.
Contact us today for a free consultation to learn how we can help with HST payments and filing. Take the stress out of your HST payments!
HST payment deadlines vary based on your reporting period. Most businesses file annually, quarterly, or monthly. Annual filers typically have to pay their HST by April 30, quarterly filers by the end of the month following the quarter, and monthly filers by the end of the following month.
You can pay your HST online through your financial institution, by using the CRA’s My Payment service, by pre-authorized debit, or by mail using a remittance voucher. Ensure to keep records of all payments made.
Missing the HST payment deadline can result in penalties and interest charges. The CRA charges daily interest on overdue amounts and may apply late-filing penalties, which can add up quickly.
Yes, if you are unable to pay your HST in full, you can contact the CRA to arrange a payment plan. It’s important to reach out to them proactively to avoid further penalties and interest.
You should keep detailed records of all sales and purchases, including invoices, receipts, and any documents related to input tax credits. These records should be kept for at least six years as they may be required for audit purposes.
Yes, certain goods and services are exempt from HST, including basic groceries, prescription medications, medical devices, and residential rent. It’s important to understand these exemptions to ensure compliance and correct filing.
To calculate the HST you owe, subtract your input tax credits (ITCs) from the HST collected on sales. ITCs are the HST you paid on business-related purchases. The difference is the amount you owe to the CRA or are entitled to as a refund.
