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.

Calculating net tax for a charity

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

Taxable revenues
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
Taxable expenses (excluding GST and QST)
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

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