Self-assessment (GST/HST)

When the tax is yours to calculate

Most GST/HST reaches your books through an invoice. Self-assessment covers the cases where no invoice charges it, so the law makes you report it. Three situations come up most often for small Ontario businesses.

The first is imported services or intangible property, such as software rights, bought from an unregistered non-resident supplier. If you will not use them at least 90% in your commercial activities, you generally self-assess the GST or federal part of the HST on the amount you were charged, in Canadian dollars. The second is a taxable good brought into a participating province, where the provincial part of the HST may still be owed even though it was not collected at the border. The third is a change in how you use property, for example when something you bought mainly for the business begins to be used mainly for other purposes, or when you take property or services for a shareholder’s benefit.

Where it appears on the return

A registrant reports most of these amounts on line 405, Other GST/HST to be self-assessed. Tax due on a purchase of taxable real property that you pay directly to the CRA goes on line 205 when the commercial use will be more than 50%.

Timing matters. For imported services, the tax is due in the reporting period in which the service was paid for or became payable. If you are not registered, you still owe the tax on imported services, but you report it on a separate return, Form GST59, rather than on a regular GST/HST return. An unregistered person who must self-assess the provincial part of the HST on goods uses Form GST489.

An illustrative example

Suppose an Ontario registrant pays a non-resident, unregistered consultant 2,000 dollars for advice that the business will not use at least 90% in commercial activities. This is an illustration only, and the rate and the amount of any recovery depend on the facts. The consultant charged no tax, so the registrant reports the tax on line 405 for the period in which the fee was paid or became payable. Depending on how much of the service is used in commercial activities, an input tax credit may then be available for some of that tax, so the net cost can be smaller than the gross amount.

Common mistakes and records

The usual mistake is silence. A foreign invoice with no tax on it looks complete. Keep the invoice, note where the supplier is located and whether it is registered, and record how the purchase will be used.

Self-assessment is separate from the input tax credit: one reports tax you owe, the other recovers tax you paid.

What to discuss with your accountant

Bring a list of foreign subscriptions, contractors and equipment bought outside Canada, any property you now use differently, and any purchases of real property. Ask which of them need self-assessment, which line applies, and whether earlier periods need to be corrected.