Are Bookkeeping Services Taxable in Canada?

April 19, 2021 | Written by: Sohail Afzal

are-bookkeeping-services-taxable-in-canada

Running a business in Canada and knowing about your taxes are the two things that go hand in hand. It’s all fun and games until the HST (Harmonized Sales Tax) jumps in. Since there are different provincial and federal tax rates in Canada, it isn’t easy to keep up with all the rates. Fortunately, some goods and services are on the exempt list, while some services are on the zero-rated list. The best way to deal with your HST filings is to hire a professional bookkeeper.

Talking about bookkeeping services, are they taxable in Canada?

YES, Bookkeeping services are taxable in Canada.

Then why is there so much confusion about bookkeeping services being taxable or not? It is because some services that are on the exempt list also include financial services. These financial services strictly include only the bank accounting fees, loans, and other bank-related services.

Here is a quick list to give you a clear picture of what is taxable and what is exempted.

Services & Goods That Are Exempted From GST/HST

Services

  • Day Care services
  • Freight transportation services
  • Music lessons
  • Medical and dental services
  • Educational services
  • Services provided by charities
  • Financial services (bookkeeping is not included)
  • Legal aid services

Goods

  • Used residential housing
  • Goods sold by charities
  • Food and beverages sold in educational institutions
  • Basic groceries including meat, fish, poultry, eggs, coffee, tea, cereals, dairy products, vegetables, etc. Groceries don’t include liquor, candies, snacks, chocolate bars, etc.
  • Feminine hygiene products (sanitary napkins, tampons, etc.)
  • Medical devices (artificial limbs or teeth, walking aids, wheelchairs, eyeglasses, hearing aids, etc.)

This is not all, but the lists give you a general idea of what type of services and goods are exempted from the tax. Unfortunately, bookkeeping or accounting services are not on any of the lists in any province of Canada. Now getting back to HST, which is also a pretty complicated tax division.

What Is HST?

It is a provincial tax that is remitted to the CRA like other taxes. But it’s not as simple as GST. HST is a combination of provincial and federal taxes. These provincial and federal taxes are the same covered in the above lists. Since HST is a consumption tax, you, as a business owner, along with your customers, will be paying this. Your business vendor will collect these taxes and then remit them to CRA. After the remittance, the provincial portion of the HST is allocated to the respective local government.

Is HST Any Good?

Although the critics of HST have been claiming that it adds further to the cost of business, proponents have a different theory. On the flip side, the proponents of HST argue that it increases the competition between similar companies, which ultimately makes them lower their prices. The final beneficiary is the consumer from HST.

Canadian Provinces That Apply HST

Half of all the ten provinces in Canada apply HST. These provinces include

  • New Brunswick
  • Nova Scotia
  • Newfoundland
  • Labrador
  • Edward Island

Conclusion

Maintaining your books along with all the complex operations of the business seems quite a struggle. No efficient business person can agree that they engage in bookkeeping on their own. Instead, the best practice in this regard is to hire a professional bookkeeper or an accounting firm. You can go for an in-house bookkeeper too, but since this department becomes active once a year, it is better to outsource your tax matters to a firm.

Sohail Afzal CPA Toronto

Sohail Afzal, CPA, CMA, MBA

Sohail Afzal, (CPA, CMA, MBA) is the founder & CEO of GTA Accounting Professional Corporation. He is a highly experienced Chartered Professional Accountant and businessman himself and understands the challenges that many businesses face when it comes to cash flow management. As an experienced business consultant & tax advisor, he is helping companies grow by providing the technical, financial, and contractual information necessary for strategic decision-making.

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