The Tax Credit for All Canadians Act (Bill C-78) and the Canadian Small Business Carbon Credit are two important initiatives designed to ease financial burdens. Whether you’re taking advantage of the temporary canada GST HST credit or cashing in on your carbon rebate, these measures represent valuable opportunities for small businesses. In this blog we will explore how these tax breaks can benefit your business and give practical advice on how to make the most of them.
Understanding the GST/HST Holiday Tax Credit
Last month, the Canadian government introduced Bill C-78, a new law aimed at easing the financial burden on Canadians. From now until February 15, 2025, several everyday essentials along with some holiday treats will be exempt from the Goods and Services Tax (GST) and Harmonized Sales Tax (HST). The initiative is designed to ease the financial pressures of the holiday season and the first month and a half of the new year. It provides businesses with an opportunity to increase sales by promoting tax-free items, once they have navigated the challenges of understanding the legislation. Overall, this is a great time to take advantage of these savings and attract more customers.
Which items are eligible for the Canadian GST/HST tax credit?
During the GST/HST holiday tax break, the federal government has identified several categories of products that are exempt from the tax:
- Children’s clothes, diapers and shoes: Includes items such as winter jackets, winter pants, boots, hats, gloves and diapers.
- Child car seat and auxiliary seats: Necessary for children’s safety, these items remain tax-free.
- Children’s toys and puzzles: Toys for children under 14 and puzzles for all ages qualify for the GST/HST holiday tax credit.
- Video game consoles, controllers and physical video games: Video game consoles, controllers and physical games are included.
- Books and printed newspapers: Physical books and printed publications are exempt.
- Christmas and similar decorative trees: Natural and artificial Christmas and Hanukkah trees are exempt from tax.
- Food and drink: Covers pre-packaged goods, beverages and eligible meals at restaurants or catering services.
How consumers can maximize savings
Eligible items purchased between now and February 15, 2025 will automatically be exempt from GST/HST, provided they are paid in full and delivered within that time frame. Although proof of payment is not required to claim an exemption, it is good practice to check for errors. To maximize your savings, plan your shopping during this GST/HST holiday and take advantage of this temporary tax break.
What does this mean for companies?
Until February 15, 2025, businesses may not charge GST/HST on qualifying goods and services because these items are temporarily zero-rated with a tax rate of 0 percent. Businesses can still claim input tax credits for the GST/HST paid on costs associated with those goods. As always, accurate record keeping is essential to ensure compliance and smooth reporting. Ensure all employees are trained to manage GST/HST exempt sales and deal with customer inquiries. They should also know how to correct errors if GST/HST is charged in error. Clear communication is also key – use in-store signage, newsletters and social media to inform customers about tax holidays. This not only ensures compliance, but also builds trust, potentially increasing sales during this period. The Canada Revenue Agency (CRA) plans to focus enforcement on companies that willfully ignore the rules, such as collecting GST/HST and failing to remit it on returns. Companies that make a good-faith effort to comply will generally not face penalties, which underscores the importance of understanding and properly applying the measures. To help you stay compliant, please contact us directly at (905) 680-8669 and one of our tax professionals will be able to ensure your business stays compliant and maximizes the benefits of this tax incentive program.
FAQ About GST/HST Holiday Tax Credit
Can I claim GST/HST on items purchased before December 14, 2024?
No, the exemption only applies to purchases made between December 14, 2024 and February 15, 2025.
What if I was charged GST/HST on a qualifying item during the two-month period?
If you were incorrectly charged GST/HST, contact the retailer for a refund. Be sure to keep the receipt as proof of purchase. If you can’t get a refund from the seller, businesses can claim the Paid Tax Credit (ITC) on their next GST/HST return to get a credit for the GST/HST paid.
Does the tax credit apply to online purchases?
Yes, as long as the online seller complies with Canadian Goods and Services Tax (GST/HST) regulations and the item qualifies for an exemption.
Are there penalties for businesses that do not comply with the GST/HST tax credit?
Yes, businesses can face penalties for incorrectly charging GST/HST during the two-month tax holiday. It would be a good idea to consult with your accountant to avoid mistakes.
Canadian Small Business Carbon Rebate
The GST/HST holiday tax break isn’t the only opportunity for small businesses to benefit this winter. Canadian Controlled Private Corporations (CCPCs) can also take advantage of the Canada Carbon Credit (CCR), introduced in the 2024 federal budget. This program aims to return more than $2 billion in federal carbon tax revenue to eligible small businesses. The CCR is designed to ease the financial burden of the federal carbon pricing system, targeting businesses with fewer than 500 employees in affected provinces. Offering a refundable tax credit, the program adjusts retroactively to 2019 and includes adjustments for inflation. Rebate calculations are based on payroll data, including T4 summaries, and will be updated annually. Going forward, businesses can expect the rebates to remain tax-free, helping to reduce operating costs while complying with Canada’s environmental goals. The CCR is part of the Climate Action Incentive Fund, a wider initiative that supports businesses to address the financial impact of the carbon tax. This program is a key component of efforts to balance economic growth with environmental sustainability.
Eligibility for the Canadian Carbon Credit
To qualify for the Canadian Carbon Credit (CCR), companies must meet certain criteria. Your company must be a Canadian Controlled Private Corporation (CCPC) and must have paid carbon taxes during the fiscal year. The discount is available to companies with fewer than 500 employees and depends on the province where your company is located. Some provinces, such as Ontario, Alberta and Saskatchewan, are eligible for multiple years, while others, such as Quebec, are not. Unfortunately, cooperatives and credit unions are not eligible for this rebate. If your business meets all the requirements, the rebate will be applied automatically and you will receive a notification confirming the payment. For businesses that filed their 2023 tax returns by July 15, 2024 and are registered for direct deposit with the Canada Revenue Agency (CRA), the rebate should have already been received. Checks will be issued by regular mail to companies not registered for direct deposit. If you are unsure whether your business qualifies for CCR, our team of experienced accountants are here to guide you. Feel free to contact our Niagara office for assistance.
Maximize savings this winter for your small business
Holiday GST/HST tax credits and the Canada Carbon Credit offer great opportunities for small businesses. These initiatives help increase sales by promoting tax-free items and enable carbon tax refunds, offering valuable support during the busy holiday season and beyond. In DDL & Co. we specialize in guiding businesses through these programs, ensuring they are compliant and maximizing savings. Contact our team of professional accountants in Niagara today for personalized advice and take advantage of these opportunities.
