What Are the Penalties for Filing a Late GST/HST Return?
The Answer Depends on the Balance of Your GST/HST Account
What are the penalties for filing a late GST/HST return? According to the Canada Revenue Agency's RC4022: General Information for GST / HST Registrants there are no GST late filing penalties if your GST/HST account has a $0 balance or the Canada Revenue Agency (CRA) owes you a refund on your GST return.
However, if that's not the case and you file a late return, the GST penalties are 1% of the amount owing plus the result of the following calculation:
25% of the amount you calculated in (a) above × the number of months the return is overdue, to a maximum of 12 months. So, for example, suppose you owe $10,000 in GST?HST and you are six months late in making the payment. In addition to the original $10,000 GST?HST remittance you would owe:
(1% of $20,000) + 25% of (1% of $20,000) x 6 = $500 in penalties
But that's not all. The Canada Revenue Agency will also charge interest on an overdue amount equal to the 90 day Treasury bill rate plus 4%.
Late filing of a GST/HST return is not the only way you can incur GST/HST penalties.
Ignoring a Demand to File
You can also be fined for non-compliance. If you receive a demand to file a return and do not do so, a penalty of $250 will be charged.
Filing Incorrect Returns
- It is not uncommon to make a mistake when filing a GST/HST Return. For example, you may forget to include an Input Tax Credit (ITC). If so you do not need to file an updated return; you can simply include the missing ITC on a subsequent return. (Generally, you have up to four years to claim a missing ITC. See the CRA's Time Limits for claiming ITCs for more information.)
- If you made other errors on a previously filed GST/HST return, such as incorrect amounts of GST/HST collected or collectible, you can request an adjustment for the reporting period in question. Normally such changes can be made online through the CRA's My Business Account service, or you can do this by mail.
- If you have deliberately not reported the full amount of GST/HST collected and wish to make amends at some future date you can take advantage of the CRA's voluntary disclosure program (VDP), which gives you the opportunity to make amends by paying amounts owing and potentially avoid penalties and possible prosecution. You can submit a voluntary disclosure by filling out and signing Form RC199, Voluntary Disclosures Program (VDP) Taxpayer Agreement, or writing a letter giving the same information as on the form. Form RC199 or the equivalent letter can be submitted online using the documents upload facility in the My Business Account service. Note that submitting a VDP does not necessarily mean that you will be granted relief by the CRA; each request is reviewed individually. A VDP request may be granted in whole or in part, or completely denied. (If the request is not completely granted the CRA will explain the reasons for the decision.)
If you file an inaccurate return, you can be subject to a penalty of:
5% of the amount plus 1% per month of the difference between the reported amount and the actual amount (to a maximum of 10%).
If you have been instructed to make installment payments and you do not make a payment by the due date, you can be charged installment interest at the 90 day Treasury bill rate plus 4% until the installed amount plus accrued interest is paid.
You Cannot Deduct GST Penalties from Income Tax!
Just to rub some salt into the wound, you can't claim any income tax deduction for any penalty you paid or owe for failing to file a GST/HST return or for any arrears interest you paid or owe for outstanding GST/HST amounts.
The moral of the story is you definitely want to get your GST/HST return in on time if you owe the Canada Revenue Agency money.