Late GST/HST Filing Penalty: How It Works and Relief Options

What is the CRA penalty for filing GST/HST late in Canada?

A GST/HST return filed after its due date draws a penalty of 1% of the tax still unpaid on the due date, plus 25% of that penalty for each complete month the return is late, up to 12 months. The penalty tops out at 4% of the unpaid tax (CRA: GST/HST filing penalties; Excise Tax Act, s. 280.1). It is worked out separately for each reporting period (the month, quarter or year a return covers), so three late quarterly returns carry three penalties, each with its own month count. Interest is charged separately, and other penalties can stack on top.

The penalty applies only when tax is unpaid. A return that shows nothing owing, or a refund, carries none.

This page covers accounts the CRA administers. A business located in Quebec generally files with Revenu Québec; see the Quebec section below.

Filing the return stops the monthly count. Paying the tax stops interest on the amount paid. A relief request can be made at any point inside the time limit.

A late return is not a simple case when:

• more than one period is late;
• the CRA has estimated an amount or sent a demand to file;
• the books are behind, so the return's numbers cannot be stated with confidence; or
• a corporation also has T2 or payroll filings missing.

In those cases the real returns may show more or less than the CRA's number. The books decide which periods to file first and whether a relief request is worth making; see bookkeeping help.

Gather the period and its due date, the net tax (roughly the GST/HST collected less input tax credits), every payment with its date, each CRA notice, and the reason for the delay.

How is the late GST/HST filing penalty calculated?

The CRA works the penalty out as A + (B × C) (CRA: GST/HST filing penalties).

The statute fixes the base at the amounts required to be paid for the period and not paid by the filing due date. The month count runs until the day the return is filed, not the day it is paid (Excise Tax Act, s. 280.1).

The due date depends on the filer (CRA: reporting requirements and deadlines):

A due date on a weekend or public holiday moves to the next business day.

Does paying on time lower the late-filing penalty?

Yes. The penalty base is only the amount that was required to be paid and was still unpaid on the filing due date, so tax paid by that day comes out of the base even when the return is late. If all the tax was paid by then, the base is zero (Excise Tax Act, s. 280.1).

A payment made after the filing due date does not shrink the base. It stops interest on the amount paid, but the penalty already counted stays, and the monthly part keeps growing until the return is filed.

An individual on the annual schedule with a December 31 year-end pays by April 30 but files by June 15. The penalty base is what is unpaid on June 15, while interest starts the day after April 30.

Is there a late-filing penalty if I owe nothing or I am owed a refund?

No. The CRA does not charge the late-filing penalty when nothing is owing or the CRA owes a refund (CRA: GST/HST filing penalties).

The return is still required for every period, and a refund is claimed on the return, so it is not paid until the return is filed. A refund return cannot wait forever: an input tax credit generally has to be claimed on a return filed by the due date for the last reporting period that ends within four years after the end of the period it belongs to (a shorter limit applies to some large registrants and financial institutions), so credits on very late returns can be lost (Excise Tax Act, s. 225(4)). The electronic-filing and demand penalties below do not depend on a balance. For a registrant with nothing to report, see missed nil GST/HST returns.

What interest does the CRA charge on top of the penalty?

Interest on an overdue GST/HST amount is the CRA's basic rate plus 4%. The basic rate follows 90-day Treasury bill rates and is reset every calendar quarter (RC4022; Memorandum 16-2). For the fourth calendar quarter of the year shown on this page the overdue rate is 7% (CRA: prescribed interest rates). Read the quarter you are in before relying on it.

Interest starts the day after the tax was due to be paid and runs until it is paid (Excise Tax Act, s. 280). It does not wait for the return and it is not a penalty: a return filed on time but paid late draws interest and no filing penalty.

Interest is compounded daily on the total still outstanding (Excise Tax Act, s. 124(1); Memorandum 16-2, para. 8). That is why the balance keeps growing after the return is filed: unpaid tax, any unpaid penalty and earlier interest all sit in the base.

What other penalties can come with a late GST/HST return?

Two more penalties can be added to the late-filing penalty:

Most GST/HST registrants must file electronically. Charities and certain listed financial institutions are exempt, and the CRA grants other exemptions case by case, on a written request (CRA: reporting requirements and deadlines). The electronic-filing penalty is charged in addition to any other penalty (Excise Tax Act, s. 280.11), and the CRA says the demand penalty (s. 283) is in addition to other penalties that may apply (CRA: GST/HST filing penalties).

Errors in a return carry penalties of their own, separate from lateness. A false statement or omission made knowingly, or through gross negligence, draws the penalty in s. 285. On electronically filed returns, the CRA can also charge a penalty for leaving out required information or misreporting certain amounts, such as recaptured input tax credits (s. 284.01; same CRA page). To fix a mistake after filing, see correcting a filed GST/HST return. If the CRA has already estimated an amount, see estimated assessments for unfiled returns.

Can I deduct the GST/HST penalty or interest on my income tax return?

No. The CRA says no income tax deduction is allowed for a penalty for failing to correctly file a GST/HST return (CRA: GST/HST filing penalties). The Income Tax Act bars deductions for fines and penalties (s. 67.6) and for interest under Part IX of the Excise Tax Act (s. 18(1)(t)).

The charge still has to be recorded in the books. See recording CRA reassessments and penalties.

Can the CRA cancel or waive the GST/HST penalty or interest?

Sometimes. The Excise Tax Act lets the CRA waive or cancel interest and the late-filing, electronic-filing and failure-to-report penalties, on its own or on request (s. 281.1). The section does not name the demand penalty (s. 283) or the false-statement penalty (s. 285), and the CRA lists the s. 285 gross-negligence penalty among charges it has no legislative authority to cancel through relief (CRA: situations where relief may be possible). Relief is discretionary, and it does not reduce the tax itself.

Disputing a charge you think is wrong, including on a due-diligence defence, is a separate route: a notice of objection, due within 90 days after the notice of assessment is sent (Excise Tax Act, s. 301(1.1)).

Sources: Memorandum 16-3, paras. 11 to 14 and 30 to 32; CRA: situations where relief may be possible.

Where an extraordinary circumstance beyond your control prevented compliance, the CRA also asks whether you have a satisfactory record of compliance, knowingly let a balance sit, acted quickly to fix the omission, and used reasonable care (Memorandum 16-3, para. 15). The CRA's guidance describes no automatic waiver for a first late return: relief stays discretionary, and the request still has to be made.

How do I ask the CRA for relief, and how far back can I go?

The CRA's request pages state no requirement to file or pay first. To send the request, a business can use My Business Account or Represent a Client online, choose the program account and open the relief request service. The alternative is Form RC4288, uploaded through the Submit documents service or mailed to the office the form's last page lists for your province (CRA: how to request relief).

Include the business number or account identifier, the reporting periods, and a detailed, complete and accurate description of what happened. Add documents that match the ground:

The request must come within 10 calendar years after the end of the reporting period (Excise Tax Act, s. 281.1). For penalties the CRA counts by calendar year: a request made in a given year can reach a period that ended within 10 years before that year, and the line rolls forward every January 1. For interest it can consider what accrued within the 10 calendar years before the year of the request, even on an older reporting period (CRA: relief request time limits). Section 281.1 words the interest limit by reporting period too, so for an older debt ask the CRA before assuming it is out of reach. Do not wait near the edge.

If the request is refused, the CRA gives its reasons in writing and a second review can be asked for (Memorandum 16-3, paras. 19 and 26 to 28). What comes after a refusal is covered in CRA penalties, interest and relief.

I am in Quebec: do these rules apply?

Only partly. A business located in Quebec generally files its GST/HST returns with Revenu Québec, not the CRA (RC4022). The penalty formula is federal law (Excise Tax Act, s. 280.1), but the account is Revenu Québec's, so the CRA steps above are for accounts the CRA administers.

Check which agency signed the notice. If it is Revenu Québec, ask it how to request relief; CRA penalties, interest and relief outlines its process. Quebec sales tax has its own penalties and is not covered here.

Can I be personally liable for the business's GST/HST?

The registrant owes the tax, interest and penalties. A sole proprietor is the registrant, so the debt is personal.

Each current or former general partner is jointly and severally liable for the partnership's GST/HST debt that became payable while the person was a member and, for a member at dissolution, for later amounts. Debt from before a partner joined reaches only partnership property. A limited partner who is not also a general partner is outside the rule (Excise Tax Act, s. 272.1(5)).

A corporation's directors when its net tax was due can be liable with it for the unremitted net tax and its interest and penalties (s. 323(1)), but only after a collection condition is met, such as an unsatisfied court execution or a liquidation or bankruptcy claim (s. 323(2)). A director who took the care a reasonably prudent person would have is not liable (s. 323(3)), and the CRA cannot assess a director more than two years after the person last ceased to be a director (s. 323(5)).

What should I do first: file, pay, then ask for relief?

Each step stops a different charge: filing stops the monthly penalty growing, and paying stops interest on what is paid.

1. List the late periods with their due dates, and read every CRA notice to see which charge is which: late-filing penalty, electronic-filing penalty, demand penalty or interest. A demand to file states a date; file the return it names by then, because missing the date adds the demand penalty.
2. Settle the numbers from the books: sales, tax collected, input tax credits and payments for each period.
3. If several returns are overdue and the CRA has not started an audit or investigation, ask whether a voluntary disclosure fits before you file. The application carries the corrective returns, and penalties or interest already assessed are excluded (Memorandum 16-5-1, paras. 9 and 15; CRA: how to apply). Do not let a demand date pass while you decide. See reviews, audits and voluntary disclosure.
4. File each late return, electronically if you are required to. This stops the monthly count for that period.
5. Pay what you can, when you can. Interest keeps running on whatever stays unpaid. If you cannot pay in full, see CRA payment arrangements for business debt.
6. Ask for relief on the ground that fits, with documents, inside the time limit.

Example

These examples are illustrative. Amounts are in Canadian dollars.

A quarterly return one month late

A sole proprietor's quarterly return is due April 30. Net tax is C$4,000, unpaid, and the return is filed June 5, one complete month late. A is 1% of C$4,000, or C$40. B is a quarter of A, or C$10, times one month. The penalty is C$40 + C$10 = C$50, plus interest on the C$4,000 until it is paid. If it is paid on June 5, 36 days after the due date, interest at an illustrative 7% a year is about C$28.

A corporation 14 months late

A corporation has C$20,000 unpaid when its return is due and files 14 months late. The month count stops at 12. A is C$200, B is C$50, and the penalty is C$200 + (C$50 × 12) = C$800, plus interest. Had the corporation paid C$14,000 by the due date, A would have been 1% of C$6,000, or C$60, with B at C$15, so the penalty would have been C$60 + (C$15 × 12) = C$240.

A refund return filed late

A corporation expects a C$8,000 refund and files six months late. No late-filing penalty applies because nothing is owing. The refund is claimed on the return, so it is not paid until the return is filed.

Different for you?

• Several periods are late, or the CRA has estimated an amount or sent a demand to file: the real returns may show more or less than the CRA's number, and the books decide which periods to file first and whether a relief request is worth making. Start with estimated assessments for unfiled returns and bookkeeping help.
• Your books are months behind and you cannot say what a return should show: see catching up on overdue books and bookkeeping help.
• Your account was open with nothing to report and you did not file: see missed nil GST/HST returns.
• Your corporation missed its T2, GST/HST and payroll for years: see catching up on unfiled corporate returns.
• You cannot pay the balance in one go: see CRA payment arrangements for business debt.
• An accountant or bookkeeper missed the filing: see what to do when an accountant missed filings or stopped responding.
• The charge is on income tax, payroll or slips, or relief spans other CRA accounts: see CRA penalties, interest and relief; for late payroll remittances, see late payroll remittances.
• You need the filing steps themselves: see filing GST/HST and input tax credits.