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GST Transactions and Returns

  • 1.  GST Transactions and Returns

    Posted Sep 03, 2019 04:40 PM
    This is more a general question than one specific to GP but a.) ya'll are the smartest people I know and b.) I think it will impact some processing within GP once I understand it.

    We are embarking on doing business in Canada, which we haven't done in the past. I've got my Canadian Business Number and GST number so I've marked two significant 'to-do's' off my list. My next project to tackle is to begin thinking about how we invoice our customers for these Canadian transactions. We are a vehicle leasing company - we lease passenger vehicles to other businesses and will soon be doing so throughout Canada. We will not have a physical presence there - only vehicles located in various provinces.

    I know I need to remit my periodic GST returns in CAD figures and dollars. My question to those who invoice customers in Canada - do I also need to invoice my customers in Canadian dollars and collect their payment in Canadian dollars? Or, can I continue to invoice in USD and do some sort of conversion when it comes time to file the return and remit the taxes? I know there are certain requirements for invoicing, so that our customers can also deduct these expenses as an ITC credit, and I'm wondering if invoicing them in USD will negate that.

    My brain is spinning on all of this CAD stuff so if anyone has some knowledge they'd like to spread, please message me so I can pick your brain!

    Eventually I'll have to track this stuff in GP, which is a completely different topic :)

    Tiffany Ziegler
    Vice President & Controller
    Velcor Leasing Corporation
    Madison WI

  • 2.  RE: GST Transactions and Returns

    Posted Sep 03, 2019 09:39 PM
    Hi Tiffany,

    Some high level info, let me know if this is what you're looking for. It's not that hard really, at least to me (a Canadian) it sure seems a lot simpler than some US tax stuff!

    The rates differ by province, some having HST ("Harmonized" sales tax meaning it's part provincial and part federal), and some having GST + a provincial tax that may have different rules. What I'm describing is HST/GST as I live in Ontario where I don't have to worry about separate provincial sales taxes, we use a harmonized rate of 13%. With HST you don't care what is federal and what is provincial, it's one rate to charge, so nice for administering it!

    It doesn't matter how you bill as far as I'm aware, but you must remit and file in Canadian dollars. I found an article from a Canadian tax firm that has more details on what rates are appropriate, but the options seem fairly obvious to me (you have choices including the average FX rate for that month in which it's paid). ​

    From a tax setup in GP perspective, typically it's a simple setup of x% on the tax details (you may need one per province if dealing with multiple provinces), with the tax collected going to a liability account typically (tax payable). You might be a quarterly filer, at least initially, and the CRA usually will tell you if you need to file more often than that. The filing is 30 days after the end of the period for which it relates. The remittance is based on your tax collected on sales minus any input tax credits - i.e. HST paid on the taxable supplies to provide your services. Think of something physical like a widget, it costs me $100 to buy some and I sell them for $150. I charge 13% on the $150 ($19.50) and I would have paid 13% on the ones I bought if I bought them in the same jurisdiction ($13.00). If that was the only activity in the period, my tax payable would be $6.50. In your ilne of business, if you don't have a physical presence there you may not have costs there that will incur ITC's though, hard to say.

    I hope that helps a bit?


    Jen Kuntz, CPA, CGA, Microsoft MVP (Business Applications), GPUG All-Star

    Independent Consultant
    Kuntz Consulting Inc.
    Cambridge, ON, Canada


  • 3.  RE: GST Transactions and Returns

    Posted Sep 04, 2019 09:50 AM
    Treaty-based then, correct?

    As Jen said, doing business in a province like Ontario is the easiest since the rate is just one rate.  Other provinces like Quebec might cause some additional setups as tax rates may need to calculate on the subtotal+GST instead of just the subtotal.  Having a Canadian bank is very nice because Canadian tax submissions are easy to file on bank websites.  Paper is fine, but the bank processes are so slick.

    Essentially the GST you pay on purchases is netted against the GST you receive when it comes time to calculate the tax returns.  Just a conceptual change from USA tax, but something to get used to.

    Lots to think about and whenever you enter into business in another country...

    Keith Koopmans
    South Holland IL


  • 4.  RE: GST Transactions and Returns

    Posted Sep 04, 2019 10:27 AM
    Hi Tiffany,

    Just to add being Canadian myself, but living in the US and having both a US and Canadian business there are a few other considerations...

    1. Make sure the company that has the GST number is the ONLY company claiming the input tax credits; - You are not allowed to claim GST input tax credits from the US company doing business for the Canadian company. The Canadian company needs to have the expense;
    2. The conversion needs to be on the Date of the invoice or when services provided (Be constant) - No year or month exchange rate average;
    3. Agree with Jen, simpler from a Canadian bank, but if you are setting up all the other transactions you need that anyway;
    4. Keep VENDORS / Customers separate - If you have a customer that has both US and Canadian - make 2 customer cards at a min;
    5. Need you need to concern yourself with each of the provincial/territorial tax laws - different provinces/territories have different reporting requirements;
    6. If you deal in the Gas/Oil exploration, then there is even more reporting;
    7. Auditing - If the same US based company is operating in Canada then you are open to full audits from not only the IRS but also CRA - I would recommend creating a separate Canadian entity - New books/bank accounts etc.
    8. Canadian Income Taxes - By law if you provide services in Canada, you are required to file Canadian Income taxes also...
    9 - ALWAY talk to a cross boarder accountant / tax expert - save your self the headache now - it will come!

    Kerry Hataley
    CEO & President
    Nanook Software, Inc


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