What Are the Penalties for Filing a Late GST/HST Return?
It depends on the balance of your GST/HST account
Most Canadian businesses must register to collect consumption tax in the form of the goods and services tax (GST) and harmonized sales tax (HST). Sellers collect these taxes from customers at the time of sale and then file and pay them to the Canada Revenue Agency (CRA) at intervals determined by the government agency. If you miss your filing deadline, you may be subject to penalties.
Late Filing Penalties
According to the CRA, there are no GST late penalties if your GST/HST account has a zero balance or the CRA owes you a refund on your GST return. However, if you do owe a balance and you file a late return, the GST penalties are 1% of the amount owed plus the result of the following calculation:
Twenty-five percent of the amount you calculated above times the number of months the GST 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 = $200
(25% of $200) x 6 = $300
$300 + $200 = $500 total penalties
But that's not all. The CRA will also charge interest on any 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. You can also receive fines for the following:
- If you receive a demand to file a general sales tax return and do not do so, a penalty of $250 will be charged.
- If you fail to file electronically when required to do so, you will be charged $100 for the first offense and $250 for every instance thereafter.
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.
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 owed and potentially avoid penalties and possible prosecution. You can submit a voluntary disclosure by filling out and signing Form RC199, Voluntary Disclosures Program (VDP) Application, or writing a letter providing the same information 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 you file an inaccurate GST 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.
Penalties Aren't Tax Deductible
Just to rub some salt into the wound, you can't claim any income tax deduction for any penalties or interest you paid or owe for late filing of a GST/HST return. The moral of the story? You definitely want to get your GST/HST return in on time if you owe the Canada Revenue Agency money. The fees and interest can compound quickly.
Canada Revenue Agency. "General Information for GST/HST Registrants," Accessed Dec. 10, 2019.