Calculate the net tax (Methods for calculating your net tax)

Regular method

You have to calculate your net tax for each GST/HST reporting period and report this amount on your GST/HST return. To do so, calculate:

• the GST/HST collected or that became collectible by you on your taxable supplies made during the reporting period
• the GST/HST paid and payable on your business purchases and expenses for which you can claim an input tax credit (ITC)

The difference between these two amounts, including any adjustments, is your net tax. For help calculating the net tax and filling out your GST/HST return using the regular method, see:

• GST/HST return working copy
• Instructions for completing a GST/HST return

You may also use the simplified method for claiming ITCs to make the net tax calculations easier. You do not have to show the GST/HST separately in your records with this method. Instead, you total the amount of your taxable purchases for which you can claim an ITC. You still have to keep the usual documents to support your ITC claims in case the CRA asks to see them.

For more information on claiming ITC's, see Input tax credits.

Quick method

You must have a permanent establishment in Canada to use the quick method. The quick method of accounting is another way to calculate the GST/HST you have to remit (pay). Most small businesses can use this method to reduce their paperwork and bookkeeping costs.

You file an election to use this method if the total revenue from your annual worldwide taxable supplies and those of your associates (including zero-rated supplies) is no more than $400,000 (including the GST/HST) in any four consecutive fiscal quarters over the last five fiscal quarters.

Certain supplies are not eligible for the quick method calculation.

Certain businesses cannot use the quick method.

To use this method, you must apply by filling out Form GST74, Election and Revocation of an Election to use the Quick Method of Accounting. For more information, see Guide RC4058, Quick Method of Accounting for GST/HST.

If you use this method, you have to continue using it for at least a year.

To calculate the net GST/HST to remit, multiply the amount from your taxable supplies (including the GST/HST) made during the reporting period by the applicable quick method remittance rate(s). The quick method remittance rates are less than the GST/HST rates of tax that you charge. You must collect the GST at 5% or the HST at the rate that applies.

Input tax credits

You cannot claim input tax credits (ITCs) for your operating expenses if you use the quick method. The quick method remittance rates take into account the GST/HST that you pay on these purchases and expenses.

You can claim ITCs for certain purchases such as:

• purchases of land
• purchases for which you can claim a capital cost allowance for income tax purposes, such as computers, vehicles, and other large equipment and machinery

You are entitled, for each fiscal year, to a 1% credit on the first $30,000 of your eligible supplies (including the GST/HST) on which you must collect the GST at 5% or the HST at the rate that applies in each fiscal year. For more information, see Charge and collect the tax – Which rate to charge.

To calculate your net tax remittance for a reporting period using the net tax calculation for charities, follow these steps:

Step 1 – Add up the following amounts:

• 60% of the GST/HST you charged on most taxable supplies, whether you collected it or not
• all of the GST/HST you charged on taxable sales of capital and real property, including deemed taxable sales of capital and real property
• all of the GST/HST deemed collected on property or services you appropriated to, or for the benefit of, a member or relative of a member of the charity (for example, an inventory item or other asset you gave to this person)
• all of the GST/HST deemed collected on any property or service you provided to an employee that is a taxable benefit for income tax purposes
• all of the GST/HST collected or collectible on supplies of goods you made while acting as an agent, or as an auctioneer and agent, that you have to report
• all of the GST/HST collected from a person by mistake
• all amounts you have to consider as GST/HST because of the recovery of a bad debt for a taxable sale of real property or capital property
• the total GST/HST adjustments for the reporting period on acquisitions of real property or capital property for which you previously claimed ITCs
• if you received approval from the Canada Revenue Agency to temporarily stop filing GST/HST returns for specific reporting periods in which you had $1,000 or less of net GST/HST to report, add any amount you carried forward from those periods

Enter this total on line 103.

Step 2 – Add up the following amounts:

• all ITCs you are claiming on purchases of, or improvements to, real property and capital property for use more than 50% in commercial activities, including the deemed tax payable when capital property is brought into a participating province for use in your commercial activities
• any ITC you are claiming on your acquisition of, or improvement to, real property based on its percentage of use in your commercial activity (must be more than 10%) and for which you have filed Form GST26, Election or Revocation of an Election by a Public Service Body to Have an Exempt Supply of Real Property Treated as a Taxable Supply, to make an election that is effective the day you acquired the property
• any ITC you are claiming on the deemed purchase of real property based on its percentage of use in your commercial activity (must be more than 10%), where the election (Form GST26) takes effect on a day other than the day you acquired the property or became a registrant
• all ITCs for goods you bought, imported or brought into a participating province that are sold by an agent, or an auctioneer and agent
• all ITCs for goods you imported on behalf of a non-resident for use exclusively in your commercial activities and sold when you are acting as an agent, or an auctioneer and agent for the non-resident person
• 60% of the total of the GST/HST adjustments (for example, for price reductions and rebates for foreign conventions and for artistic works produced for export) or of point-of-sale rebates on the provincial part of the HST that the charity gave in the reporting period (do not include the amount of any Ontario First Nations point-of-sale relief credited in the reporting period, as the charity may claim this amount by filing Form GST189, General Application for GST/HST Rebates, using code 23)
• 60% of the total tax amount of a tax adjustment note you issued in the reporting period to a pension entity
• all amounts for GST/HST adjustments you gave for tax charged in excess of the GST/HST collectible on certain supplies of property and services
• all GST/HST adjustments you gave for bad debts you wrote off during the period in respect of the sale of real property or capital property
• all amounts for GST/HST adjustments in a credit note you issued in the reporting period in respect of sales of capital property or real property
• all GST/HST adjustments for new housing rebates you credited during the period
• all ITCs that you were entitled to claim and that you carried forward from a reporting period when you did not have to use this net tax calculation for charities

Enter this total on line 106.

Step 3 – Subtract your total in Step 2 from your total in Step 1. The result is your net tax. Enter this amount on line 109 on your GST/HST return.

A charity as a whole can elect not to use the net tax calculation method assigned to charities if it meets one of the following conditions:

• the charity makes supplies outside Canada in the ordinary course of its business
• the charity makes zero-rated supplies in the ordinary course of its business
• the charity makes all or substantially all (90% or more) taxable supplies

To make this election, use Form GST488, Election or Revocation of an Election Not to Use the Net Tax Calculation for Charities. Once the election has been made, you can calculate the charity's net tax using the regular method or quick method of accounting.

A designated charity may use the special quick method of accounting for public service bodies to calculate its net tax. Designated charities cannot use the net tax calculation method for charities.

A designated charity is a charity that has applied for designation and has been designated by the Minister of National Revenue to have certain exempt services it provides to registrants made taxable.

To make the election, use Form GST287, Election or Revocation of the Election by Public Service Bodies to Use the Special Quick Method of Accounting.