CDA Essentials 2014 • Volume 1 • Issue 7 - page 11

11 Volume1 Issue7 |
CDA at Work
Tobetterunderstand
howtheGoodsand
ServicesTax(GST),
theHarmonized
SalesTax(HST)
andQuebecSales
Tax(QST)affects
Canadiandentists,
Dr.SuhamAlexander,
CDAclinicaleditor,
spokewithRob
Allwright,Associate
PartneratKPMG.
This isasummaryof
theirdiscussion,which
includesanupdateon
theCanadaRevenue
Agency(CRA)policy
relatingtodentists’
andorthodontists’
eligibilitytorecovera
portionoftheirtaxes
oneligibleexpenses.
What doDental Practices Need to KnowAbout
GST,HSTandQST?
Howaredentalpracticesaffectedbythe
GST/HSTandQST?
TheGST/HSTandQSTare “value-added
taxes,”whichmeans theyaregenerally
chargedandcollectedby suppliers at each
stage in theproductionanddistributionof
goods and services.
Registeredbusinesses chargeandcollect
the taxon their “taxable supplies” (e.g., sales
of goods and services) andclaimcredits for
theGST/HSTandQST theypayonexpenses
related to their taxableactivities. Thecredits
are referred toas “input tax credits” (ITCs)
in thecaseof theGST/HSTor “input tax
refunds” (ITRs) in thecaseof theQST. The
differencebetween the tax collected from
customers and the taxpayable to suppliers
is either remitted to thegovernment or is
refundedby thegovernment, dependingon
whichamount isgreater. (Seegraphicbelow )
Most diagnosticand treatment services
providedbya typical general dental
practice* areexempt fromGST/HSTandQST.
For taxexempt services, adental practice is
not entitled to ITCs and ITRs.
However, somedental services are taxable.
For example, servicesperformed for
cosmeticpurposes, like teethwhitening, are
taxable. For taxable services, registering for
theGST/HSTorQST facilitates the reporting
of tax collectedandallows thedentist to
claim ITCs and ITRs for theGST/HSTandQST
paidoncosts related to these services.
Whenshouldadentalpracticeregister forthe
GST/HSTorQST?
Adental practice is required to register for a
GST/HSTaccount if its total annual revenues
from taxable sales exceed$30,000. Taxable
sales are those subject toGST/HSTat the
standard ratesof taxaswell as sales that
are zero-rated (i.e., subject to taxat the rate
of 0%).
Below the$30,000 taxable sales threshold,
registration isoptional. Indecidingwhether
to register, dentists shouldconsider both
thepros (e.g., recoveryofGST/HSTorQST
oncosts) andcons (e.g., compliancecosts
related tofiling returns andpotential audits
by taxauthorities, includingapotential audit
if your practicede-registers). (SeeTable1)
Note that if thepractice’s taxableactivities
are less than10%of its total activities, then
thepracticemaychoosenot to register
because ITCs and ITRs arenot availableon
indirect costs.
Registration for theQST inQuebec is
separate fromGST/HST registration, but the
rules aregenerallyharmonizedwith the
GST/HST.
GST/HST
charged to
customers
GST/HST
paidonbusiness
purchases
(+)Owed to
Government
NetGST/HST
(-)Refundable