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Volume 1 Issue 7
|
CDA
at
W
ork
To better understand
how theGoods and
Services Tax (GST),
theHarmonized
Sales Tax (HST)
andQuebec Sales
Tax (QST) affects
Canadian dentists,
Dr. SuhamAlexander,
CDA clinical editor,
spoke with Rob
Allwright, Associate
Partner at KPMG.
This is a summary of
their discussion, which
includes an update on
the Canada Revenue
Agency (CRA) policy
relating to dentists’
and orthodontists’
eligibility to recover a
portion of their taxes
on eligible expenses.
What do Dental Practices Need to Know About
GST, HSTandQST?
How are dental practices affected by the
GST/HST andQST?
The GST/HST and QST are “value-added
taxes,” which means they are generally
charged and collected by suppliers at each
stage in the production and distribution of
goods and services.
Registered businesses charge and collect
the tax on their “taxable supplies” (e.g., sales
of goods and services) and claim credits for
the GST/HST and QST they pay on expenses
related to their taxable activities. The credits
are referred to as “input tax credits” (ITCs)
in the case of the GST/HST or “input tax
refunds” (ITRs) in the case of the QST. The
difference between the tax collected from
customers and the tax payable to suppliers
is either remitted to the government or is
refunded by the government, depending on
which amount is greater. (
See graphic below
)
Most diagnostic and treatment services
provided by a typical general dental
practice* are exempt from GST/HST and QST.
For tax exempt services, a dental practice is
not entitled to ITCs and ITRs.
However, some dental services are taxable.
For example, services performed for
cosmetic purposes, like teeth whitening, are
taxable. For taxable services, registering for
the GST/HST or QST facilitates the reporting
of tax collected and allows the dentist to
claim ITCs and ITRs for the GST/HST and QST
paid on costs related to these services.
When should a dental practice register for the
GST/HST or QST?
A dental practice is required to register for a
GST/HST account if its total annual revenues
from taxable sales exceed $30,000. Taxable
sales are those subject to GST/HST at the
standard rates of tax as well as sales that
are zero-rated (i.e., subject to tax at the rate
of 0%).
Below the $30,000 taxable sales threshold,
registration is optional. In deciding whether
to register, dentists should consider both
the pros (e.g., recovery of GST/HST or QST
on costs) and cons (e.g., compliance costs
related to filing returns and potential audits
by tax authorities, including a potential audit
if your practice de-registers). (
See Table 1
)
Note that if the practice’s taxable activities
are less than 10% of its total activities, then
the practice may choose not to register
because ITCs and ITRs are not available on
indirect costs.
Registration for the QST in Quebec is
separate from GST/HST registration, but the
rules are generally harmonized with the
GST/HST.
GST/HST
charged to
customers
GST/HST
paid on business
purchases
(+) Owed to
Government
Net GST/HST
(-) Refundable