February 9, 2018 at 4:07 pm #8850
I am a starting a Canada Based business but I charge my clients in US dollars. Do I count my income from US dollars as the amount I invoiced or the amount I received (after it’s converted)?
If I charge CDN clients in US dollars do also charge gst? (becasue we don’t have to charge US clients gst).
and, am I at a higher risk of being audited because the gov’t may be suspicious of my income versus the amount of gst I collect? (on account of having US clients)?February 9, 2018 at 4:18 pm #8851
The Happy BookkeeperKeymaster
Income is counted at the Canadian value of the USD as of the date of the invoice, as per the Bank of Canada Rate. So say, you invoice someone $100USD. That may be about $140 Canadian. So, A/R, or bank, is $100 USD, and income is $140 CDN. Because of this whatever software you are using needs to have the “Multi Currency” option turned on. More happens in the background, and I can go into further detail if you need, but the multi-currency function helps a lot.
Also, it doesn’t matter what currency you charge in regarding GST/HST, what matters is where the goods take ownership, aka “Where the supply is made”. Here’s a link from CRA to help answer your specific https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/gst-hst-businesses/charge-gst/charge-gst-hst.html But if you do need to collect GST/HST, again, the funds are valued as of the Cdn value the date of the invoice. If your business is based in the US, then you likely are not registered for GST/HST, and it’s customs that has to worry about it. (and any bills I have from US based services don’t have GST) But if you are in Canada, and your income is over $30k in four consecutive quarters, definitely check out that link to see if GST/HST is required. For example, if you are a vacation and accommodation service targeting American Tourists coming to Vacation in Canada, you can charge your American clients in American funds, but that income is still subject to GST HST. (and there’s a 50% tour package GST/HST rebate to encourage tourism!). If you have any specific questions about GST/HST, CRA can be super helpful: 1 (800) 959-5525. Just, make sure to ask “And what publication can I also see that you are referring to” as sometimes you get different answers.
And as to if a business is more susceptible to audits because of the GST not being exactly “x” percent of sales, I have not found that to be the case. Goods and supplies have different GST/HST ratings, as well as provincial rates differing depending on the “place of supply” rule. Some goods are zero rated, some goods are sold and shipped to various provinces, and so it is more typical that you think that the GST Collected is not exactly “x” percent of sales.
What IS on their radar is late filing, late paying, and also abnormal refunds. So, always file on time, and if there’s a big credit that causes a GST refund, make sure you have your data listed well (Vendor name, date of bill, GST/HST amount), and the highest 20 bills and invoices ready to be reviewed! And be sure to SEE the GST/HST on the bill when you enter it, never assume! Follow those tips, and you will be prepared for a review.
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