Yes. Canada has a value added tax, though it does not use the VAT label. The federal Goods and Services Tax (GST) sits at 5% and applies across the country, and in five provinces it is combined with the provincial sales tax into a single Harmonized Sales Tax (HST). Both are multi-stage consumption taxes collected at each step of production and distribution, with the full cost landing on the final consumer. The system is set out in the Excise Tax Act and administered by the Canada Revenue Agency.
How the GST and HST Work Like a VAT
The feature that makes Canada’s system a VAT in everything but name is the Input Tax Credit. Registered businesses charge GST or HST on what they sell, then claim credits for the tax they paid on their own business purchases. They remit only the difference. Each business ends up paying tax on the value it added, not on the full price it charged.
A worked example makes the flow clear. A sawmill buys raw timber for $1,000 and pays $50 in GST. It mills the timber and sells lumber for $1,500, collecting $75 in GST from its customer. On its return, the sawmill claims a $50 Input Tax Credit for the tax it paid on the timber and remits $25 to the CRA. The furniture maker who buys that lumber repeats the process at the next stage. At every link, the government collects tax on just the value added, and the accumulated tax shows up in the final retail price.
That mechanism is the same one European VAT systems use. Same staged collection, same credit for tax on inputs, same final burden on the consumer.
Current GST and HST Rates by Province
The 5% federal GST applies everywhere in Canada, but the total sales tax a consumer pays depends on how each province handles its own tax. Provinces fall into three groups.
HST Provinces
Five provinces combine the federal and provincial portions into a single HST:
- Ontario: 13% HST (5% federal + 8% provincial)
- New Brunswick: 15% HST (5% federal + 10% provincial)
- Newfoundland and Labrador: 15% HST (5% federal + 10% provincial)
- Prince Edward Island: 15% HST (5% federal + 10% provincial)
- Nova Scotia: 14% HST (5% federal + 9% provincial), effective April 1, 2025
Businesses in HST provinces deal with one tax return and one set of rules instead of separate federal and provincial filings.1Canada Revenue Agency (CRA). Charge and Collect the Tax – Which Rate to Charge
GST Plus a Separate Provincial Tax
Four provinces charge 5% GST and administer their own provincial sales tax independently:
- British Columbia: 5% GST + 7% PST = 12% total
- Manitoba: 5% GST + 7% RST = 12% total
- Saskatchewan: 5% GST + 6% PST = 11% total
- Quebec: 5% GST + 9.975% QST = 14.975% total
Quebec is the outlier on administration. Revenu Québec runs the QST and also collects the GST within the province on the federal government’s behalf, so Quebec businesses interact with a different agency than their counterparts elsewhere in Canada.
GST Only
Alberta and the three territories — Northwest Territories, Nunavut, and Yukon — have no provincial or territorial sales tax, so only the 5% GST applies.1Canada Revenue Agency (CRA). Charge and Collect the Tax – Which Rate to Charge
For cross-province sales, the rate is set by where the supply is made under CRA place-of-supply rules, not where the seller sits. For physical goods, that is the province where the goods are delivered or shipped. An Ontario retailer shipping a product to Alberta charges 5% GST, not 13% HST. For services, the general rule looks at the recipient’s Canadian address; when no address is available, the rate depends on where the service is primarily performed.2Canada.ca. GST/HST and Place-of-Supply Rules
What Is Taxed, Zero-Rated, and Exempt
Every good and service falls into one of three categories, and the category shapes both what the consumer pays and whether the business can recover tax on its costs.
Taxable supplies are the default. Clothing, electronics, restaurant meals, professional services, furniture, vehicles — if it does not fit one of the special categories, it carries the full GST or HST rate.3Canada Revenue Agency. Type of Supply
Zero-rated supplies are technically taxable, but at a rate of 0%. Because they still count as taxable, businesses selling them can claim Input Tax Credits on their related expenses. A grocery store charges no tax on basic food items but still recovers the tax it paid on refrigeration equipment, delivery trucks, and store supplies. Common zero-rated items include basic groceries such as bread, milk, and vegetables; prescription drugs; certain medical devices like hearing aids; agricultural products; and goods exported from Canada.3Canada Revenue Agency. Type of Supply
Exempt supplies carry no GST/HST at all, and businesses making them generally cannot claim Input Tax Credits on associated expenses. A residential landlord charges no GST/HST on rent but also cannot recover the tax paid on repairs, maintenance, or property management. Exempt supplies include most financial services, long-term residential rent, healthcare, child care, and certain educational services.3Canada Revenue Agency. Type of Supply
How Canada’s System Compares to a European VAT
In structure, GST/HST and a European VAT are near-identical. Both tax consumption at every stage of production, both let businesses deduct tax paid on inputs, and both push the final economic burden onto the end consumer.
The differences are cosmetic and administrative. European countries typically embed VAT in the displayed price; Canadian businesses add GST/HST at the register. Canada layers provincial taxes on top of the federal rate, producing the patchwork above, whereas most VAT countries apply a single national rate.
The other real difference is the rate itself. At 5%, Canada’s federal GST is well below the standard VAT in most developed countries. Even the highest combined Canadian rate of 15% sits at the EU’s minimum standard VAT floor and well below the 25% rates seen in Denmark, Sweden, and Norway. For a business operating internationally, the mechanics carry over directly: understand one system and you understand the other.
Who Has to Register and Collect It
Not every seller has to register. If your total worldwide revenue from taxable supplies is $30,000 or less over four consecutive calendar quarters, you qualify as a small supplier and registration is optional. Charities and public institutions have a higher threshold of $50,000 in taxable supplies, with a separate $250,000 gross revenue test. Once you cross the $30,000 threshold, you must register within 29 days, and you are expected to start charging GST/HST from the day of the sale that pushed you over.4Canada.ca. When to Register for and Start Charging the GST/HST
Voluntary registration below the threshold is often worthwhile because it lets you claim Input Tax Credits on your business expenses. Without registration, you absorb the tax on software, equipment, and supplies with no way to recover it.5Canada Revenue Agency (CRA). Voluntary Registration
The reach also extends beyond Canadian borders. Foreign businesses selling digital products or services to Canadian consumers — streaming subscriptions, mobile apps, e-books, online gaming, and services delivered remotely — must register for and collect GST/HST. A simplified regime exists for non-residents without a physical presence in Canada, and digital platform operators are responsible for collecting the tax on sales made through their platforms by non-registered non-resident vendors. The practical effect for Canadian consumers is that foreign digital services now show GST/HST on their invoices, the same as domestic ones.6Canada.ca. GST/HST for Digital-Economy Businesses – How to Charge and Collect the Tax