Calculation of Net Tax
To determine the amount of net tax payable, or the amount of your refund, subtract amounts to be deducted from taxes payable.
Take, for example, a charity that is registered for the GST and QST operates an art gallery and uses the net tax calculation method for charities. Its main source of revenue is taxable gallery admissions. During its reporting period, it earned exempt revenues from a parking lot and held a fund-raising dinner for which admission was also exempt.
In addition, it acquired computer equipment and installed a ventilation system for use primarily in its commercial activities.
Sample calculation of income and taxable expenses
| Gallery admissions | $20,000.00 | |
|---|---|---|
| Sales from gift shop | + | $5,000.00 |
| $25,000.00 | ||
| GST collected ($25,000 x 5%) | + | $1,250.00 |
| QST collected ($26,250 x 9.975%) | + | $2,493.75 |
| Total | $28,743.75 | |
| Contracted services (security, maintenance) | $3,000 | |
|---|---|---|
| Utilities | + | $1,500 |
| Ventilation system | + | $9,200 |
| Computer equipment | + | $2,000 |
| Gift shop inventory | + | $2,500 |
| Catering services for fund-raising dinner | + | $3,500 |
| Total | $21,700 | |
Calculation of net GST
GST payable
60% of the GST collected, that is, $1,250 × 60% = $750
Calculation of the amount to be deducted
GST paid for the ventilation system (improvements made to an immovable) and computer equipment (purchase of capital property) to be used in the gallery's commercial activities.
ITC = 5% × ($9,200 + $2,000) = $560
Net GST
The net GST is $190 ($750 - $560)
Calculation of net QST
QST payable
60% of the QST charged, that is, $2,493.75 × 60% = $1,496.25
Calculation of the amount to be deducted
QST paid for the ventilation system (improvements made to an immovable) and computer equipment (purchase of capital property) to be used in the gallery's commercial activities.
ITR = 9.975% × ($9,200 + $2,000) = $1,117.20
Net QST
The net QST is $379.05 ($1,496.25 - $1,117.20)
GST and QST rebates for public service bodies
As a public service body, the charity is also entitled, in the calculation of its net tax, to a rebate for taxes paid on expenses that do not give entitlement to ITCs and ITRs, that is, expenses other than those for the ventilation system and computer equipment.
Total taxable expenses other than expenses for the ventilation system and computer equipment
$21,700 - ($9,200 + $2,000) = $10,500
GST paid on these expenses
5% × $10,500 = $525
GST rebate for public service bodies
50% × $525 = $262.50
QST paid on these expenses
9.975% × $10,500 = $1,047.38
QST rebate for public service bodies
50% × $1,047.38 = $523.69