What Are the Penalties for Filing a Late GST/HST Return?
Definition & Examples of Late-Filing Penalties in Canada
GST/HST late-filing penalties are fees and interest applied to Canadian businesses that fail to file and pay their GST/HST taxes on time.
Tax penalties can add up quickly, especially on the large sales-tax balances that businesses accumulate. Understand how the GST/HST late-filing penalties work so you can avoid racking up even bigger tax bills than normal.
What Are the Late-Filing Penalties for the GST?
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 will be subject to penalties if you owe anything to the CRA. These penalties increase the longer you owe a balance.
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.
How the GST Late Penalty Is Calculated
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 $20,000 in GST/HST and you are six months late in making the payment. In addition to the original $20,000 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%.
Other GST Fees
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, the CRA will charge you a penalty of $250.
- If you fail to file electronically when required to do so, the CRA will charge you $100 for the first offense and $250 for every instance thereafter.
There are also penalties for missing installment payments and filing your returns with incorrect information.
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.
Interest on Installment Payments
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.
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 you can make such changes 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, you can take advantage of the CRA's voluntary disclosure program (VDP), which gives you the opportunity to come forward and pay amounts owed to potentially avoid penalties and 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 in the form.
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%).
- GST/HST late-filing penalties are fees and interest that Canadian businesses must pay when they file their GST/HST taxes late.
- If you owe any balance at the time your GST/HST is late, you will begin accruing penalties and interest.
- There are other penalties for filing inaccurate returns or failing to file electronically when requested to do so.