Is there VAT in Canada?

One of these indirect taxes is sales tax, also known in many places as VAT (Value Added Tax). In Canada, we don’t call it VAT, though. In Canada, we have both federal and provincial taxes. Our federal sales tax is called GST (Goods and Services Tax). Our provincial portions are known as PST (Provincial Sales Tax) or QST (Quebec Sales Tax). Some people also refer to these as consumption taxes. 

VAT Numbers

In Canada, VAT numbers are also known as business numbers or GST numbers. This number is assigned to all businesses in Canada by the Canada Revenue Agency (CRA). Basically, it works like this: the number is broken into 3 sections: your business number, program type, and the program account reference number. 

Here is an example: 123456789AB1234

Business number: The first 9 digits of your GST number, also known as your TX ID number.

Program type: The two letters after your 9-digit business number are the program identifiers. 

Reference Number: The last four digits are the program type reference number. 

This is important because this number distinguishes you from other businesses. This is why it is given to you when you first register. Depending on which program account you use, the last 6 digits will change, but the first 9 will always stay the same. They are individual to you.

The four major program accounts are:

• Corporate Income Tax
• Import/Export Charges
• Payroll Deductions (payroll taxes)
• Goods and Services Tax (GST)/ Harmonized Sales Tax (HST)

The only province that doesn’t include GST/HST in your business number is Quebec. This must be applied for separately through Revenu Québec. 

What Goods Do You Pay VAT Tax On?

In Canada, intangible personal property is considered taxable goods. These taxable Supplies are:

• The sale of new homes
• The sale and rental of commercial real estate
• Care repairs
• Clothing
• Footwear
• Most advertising
• Legal services
• Accounting services
• Hotel accommodations
• Franchises
• Barber services
• Hairstyle services
• Taxi and ride-sharing services
• Soft drinks, candies, potato chips

What Goods are Tax Exempt

Goods in Canada that aren’t taxable sales or are taxed at 0%  and considered to be exempt supplies according to tax laws are:

• Basic groceries (milk, bread, vegetables)
• Agricultural products such as grain, raw wool and dried tobacco leaves
• Most farm livestock
• Most fishery products (fish that are used for human consumption)
• Prescription drugs
• Drug dispensing services
• Medical devices like hearing aids (healthcare services)
• Exported goods (most that charge GST/HST once they have been exported)
• Lots of transportation services where the origin or destination is outside the country (Canada)

This is just the beginning, though. There are lots of services that are exempt from tax as well, for tax purposes. These are things like:

• Legal aid services
• Music lessons
• Child care services
• Most medical, dental and health care services
• Insurance premiums
• The sale of housing that was previously used as a residence
• Most services provided by financial institutions
• Most properties owned by charities and public institutions 
• Property and services provided by most government bodies
• Domestic ferry services
• Long-term residential rentals and condo fees
• A lot of educational services

Definition of GST in Canada and How it Works

As previously mentioned, the federal GST is the Canadian government’s version of  VAT and part of the VAT system. This federal VAT tax is charged at 5% and applies to most goods and services; hence the name, Goods and Services Tax. 

Along with goods and services that are omitted from the tax, certain people and organizations are also tax-exempt from GST paid. An example of this is under section 87 of the Indian Act. 

In Canada, most indigenous people do not have to pay GST when they purchase goods and services on a reserve. To qualify as tax-exempt, you just need to show your status card to prove you are tax-exempt. 

Definition of HST in Canada and How it Works

Some provinces in Canada use different sales tax systems and charge HST (Harmonized Sales Tax) on goods and services, rather than just GST. HST is GST and PST (Provincial Sales Tax) combined. This is a little confusing, though, because not all provinces and territories charge tax this way. 

In Canada, some provinces don’t charge PST. This is why they have a separate GST rate of 5%. These provinces/territories are Nunavut, Northwest Territories, Yukon and Alberta. Other provinces like B.C.Manitoba, Quebec, and Saskatchewan charge GST and PST separately. The rest of the provinces and territories in Canada charge HST. 

Whether you pay GST and PST separately or HST doesn’t make a difference in the percentage of tax you pay, but it can make a difference to business owners. It will change how records are kept and taxes are charged, since the final tax burden falls on them for VAT-style taxes on their tax return.

Provincial VAT Rates

In Canada, every province has a different Value Added Tax rate (GST/HST) for those who pay taxes.

It is important to keep in mind that these sales tax rates aren’t charged on groceries. Basic groceries are charged at 0% in Canada. These are things like milk, bread and vegetables. Other goods are charged based on the province where the product is supplied, not the province where it is purchased. 

For example, if you are selling an item from your business in Alberta and it is being delivered to Nova Scotia, you would charge 15% instead of 5%. 

Input Tax Credit

If you have a GST number/ business number, you may have heard of Input Tax Credits (ITCs). This is a credit you can apply for to recover any GST/HST paid or payable on certain goods. These would be property or services that were acquired or brought into Canada or certain provinces. These goods must be used for consumption or for supplying your business. 

To be approved for the input tax credit, you have to supply tax invoices to Canada’s tax authority, also known as the CRA. They need these invoices to verify your eligibility for the credit.

GST Refund Options for Tourists Leaving Canada

While Canada used to have a GST/HST visitor rebate program that refunded VAT collected, it was discontinued as of April 1, 2007. However, there are still limited exemptions for certain items, including foreign conventions, tour packages, and specific commercial Canadian exports. 

For the tour package, non-residents can claim a 50% rebate of the GST/HST paid on the accommodation portion of an eligible prepaid tour package. Rebates for foreign conventions are based on the circumstances, and exported goods can be claimed for purchased goods used outside Canada, provided they are claimed within 60 days. 

Zero-Rated Vs Tax-Exempt Goods 

In Canada, zero-rated goods are taxed at 0%. This allows businesses to claim Input Tax Credits on expenses. These include groceries, prescriptions, and exports. Tax-exempt goods are different. They aren’t subject to GST/HST, and prevent businesses from claiming ITCs on related costs. These are often things like residential rent and financial services. 

Small Supplier GST Registration Threshold

In Canada, you’re considered to be a small supplier if your total taxable supplies are $30,000 or less in a single calendar quarter, as well as over the last four calendar quarters. If you fall under this threshold, then you don’t need to register for GST/HST. As soon as you go over, you will need to register. The only exception to this is self-employed taxi or ride-share drivers, who have to register regardless. 

Charging GST/HST on Services to International Clients

You normally don’t charge GST/HST on services purchased that are provided to non-resident clients outside of Canada. These are treated as zero-rated, meaning they are taxed at 0%. That said, you do need records to prove that the client is a non-resident and not in Canada. You can still claim input tax credits for business expenses. 

GST/HST Rules for Netflix, Spotify, and Airbnb

Non-resident platforms, including Netflix, Spotify, and Airbnb, are required to collect GST/HST on services and short-term rentals to ensure equal tax treatment. To do this, they have to register under a simplified regime to collect and remit tax. This tax is added to the consumer’s bill based on their location. 

GST/HST and Online Purchases

All digital vendors, like Amazon, and non-resident vendors are required to collect and remit GST/HST on all digital products, services, and cross-border goods sold to Canadian consumers. The tax charged depends on the province where the product is being sent, and online marketplaces are required to register and collect tax if their revenue exceeds $30,000. 

Paying Tax on Private Used Car Sales

When you’re purchasing a used car, PST is required to be paid on the purchase price in some provinces. Here’s how it works in each province:

• British Columbia: 12% is paid on the Canada Blue Book Value when the vehicle is registered with ICBC. 
• Saskatchewan: 6% PST is paid, but not on vehicles that cost less than $5,000.
• Manitoba: 7% RST is paid. 
• Ontario: 13% RST (Retail Sales Tax) is paid on the purchase price or wholesale value, whichever amount is higher. 
• Quebec: 9.975% is paid. 

In Alberta, there is no provincial sales tax to pay when purchasing a used vehicle. 

GST/HST on Restaurant Tips and Gratuities

Whether tips and gratuities are subject to GST/HST depends on whether they are freely given. If the customer freely gives a tip, then there is no tax. However, if a tip or service charge is added to the bill, taxes must be paid. 

Who Qualifies for the Quarterly GST/HST Credit (Canada Groceries and Essentials Benefit)?

In Canada, individuals with income below a certain threshold are eligible for the GST/HST credit. However, as of July 2026, the GST/HST credit will be known as the Canada Groceries and Essentials Benefit. For this new program, the amounts will increase, and the eligibility process will remain the same. 

To be eligible, you must:

• Be a resident of Canada for tax purposes in the month before the CRA makes a payment, and at the start of the month when the payment is made
• Be at least 19 years old
• Be under 19 and have or had a spouse/partner and/or are/were a parent who lives/lived with their child.

You must also meet the income requirements. 

• $56,181 for single individuals without children
• $63,161 for single individuals with one child
• $66,841 for single individuals with 2 children
• $70,521 for single individuals with 3 children
• $74,201 for single individuals with 4 children
• $59,481 for married/common-law individuals with no children
• $63,161 for married/common-law individuals with one child
• $66,841 for married/common-law individuals with two children
• $70,521 for married/common-law individuals with three children
• $74,201 for married/common-law individuals with four children

How a Small Business Files a GST/HST Return

Filing a small business GST/HST return can be done in a few simple steps. However, the first thing you have to do is collect your total sale revenue, the total GST/HST collected, and the total GST/HST on business expenses (ITC). After that, you can log into your CRA My Business Account or use the GST/HST netfile form. 

Once you’ve logged in, you’re going to input all of the numbers (including business costs) into their respective lines. The system will calculate the net tax owing or refund for you. You can then review the details for the reporting period and submit the return. 

GST/HST Rules for Both Rentals and Resale Homes

When you’re selling a home in Canada, it’s important to know that there are some exceptions when it comes to paying GST/HST. New or substantially renovated homes are taxable, as well as short-term rental homes. However, long-term rentals of 30 days or more are exempt, as are resale residential real property. 

GST/HST New Housing Rebate

When you’re purchasing a new home, something to consider is the GST/HST new housing rebate. This rebate allows individuals to recover a portion of the tax that was paid on the purchase or substantial renovation of a new primary residence. That said, the home has to meet specific requirements. 

The home must be used as your primary residence, and the property must be substantially renovated or owner-built, and the price of the home should be $350,000 or less. However, there is a phased-out partial rebate up to $450,000. When it comes to applying for the rebate, the builder will generally handle it. If they don’t, though, you have two years after the transaction is finalized to file the GST190 form. 

How QST in Quebec Differs from GST/HST

QST, also known as Quebec Sales Tax, is a 9.975% provincial Value Added Tax administered by Revenu Québec. It’s different from the GST/HST federal tax, which applies across Canada. In Quebec, QST is a single tax and is calculated on the price before GST. This is different from HST, which includes GST. 

Luxury Tax on Vehicles, Aircraft, and Boats

Until November 5, 2025, Canada’s luxury tax applied to both aircraft and boats. Now it applies to vehicles priced over $ 100,000. The tax account can be calculated in 1 of 2 ways. The first is the lesser of 10% l\of the purchase price, and the second is 20% of the amount above $100,000. This tax is usually payable at the time of sale or importation. 

Place of Supply Rules for Interprovincial Shipments

The place-of-supply rules in Canada determine which province’s GST/HST rate applies to interprovincial shipments. The rate is determined by where the recipient takes possession of the item, rather than by the seller’s location. For interprovincial shipments, the general rule is that the destination province’s take rate applies.