Non-Resident GST/HST Security Deposit Calculator
A non-resident registering for GST/HST without carrying on business in Canada generally has to post security before the registration takes effect. Work out the amount, whether the small-supplier exception applies, what the cash sits idle costing you, and when it comes back.
security to post
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How the Deposit Is Calculated
| Step | Basis | Amount |
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Whether the Exception Applies
| Test | Threshold | Your Position | Met |
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Posting, Holding and Getting It Back
| Item | How It Works | Position |
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Points That Decide This
What to Do Next
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Disclaimer: Subsection 240(6) of the Excise Tax Act requires a person who applies for registration, and who does not carry on business in Canada or have a permanent establishment in Canada, to give and maintain security in an amount and form satisfactory to the Minister. The Canada Revenue Agency’s published administrative position has been that the security required for the first year is generally 50% of the estimated net tax, whether positive or negative, for the twelve-month period, and in subsequent years 50% of the actual net tax for the previous twelve months, subject to a minimum of $5,000 and a maximum of $1,000,000; the Agency has also indicated that security is generally not required where annual taxable supplies in Canada do not exceed $100,000 and estimated annual net tax is between $3,000 remittable and $3,000 refundable. These amounts, percentages and thresholds are administrative positions rather than figures fixed in the legislation and should be confirmed with the Agency before being relied on, as should the forms of security currently accepted, which have generally included cash, certified cheque, money order and bonds of specified types. Registration will generally not be finalised until acceptable security is received, and the Agency may review and adjust the amount required as the registrant’s actual net tax becomes known. Whether a person carries on business in Canada or has a permanent establishment here is determined on the facts and is a separate question from income tax residence or permanent establishment under a tax treaty. Nothing on this page determines whether registration is required or advisable in a particular case. This page is general information, not tax advice.
Why Security Exists at All
A registrant collects tax on the government’s behalf and remits it later. Where the registrant is inside Canada and something goes wrong, there are assets here and a collection process that works against them.
Where the registrant is a foreign company with nothing in Canada, neither of those is true. The security requirement is the answer to that: post something before you start collecting, so there is a fund to look to if the remittances stop.
It attaches to the absence of a Canadian presence rather than to foreign ownership. A foreign-owned corporation incorporated in Canada and operating here is not caught. A foreign company selling into Canada with no establishment here is, and the distinction is where the business is carried on rather than who owns it.
Fifty Per Cent, Floored and Capped
The starting point is half of the net tax for a twelve-month period. In the first year that is an estimate, and afterwards it is what actually happened in the preceding twelve months.
Two limits then apply. A floor means even a modest operation posts a meaningful amount, and a ceiling means a very large operation is not asked for an unbounded sum.
| Net Tax Position | Security Before Limits | After the Floor and Ceiling |
|---|---|---|
| Small, a few thousand | Very little | Lifted to the minimum |
| Moderate | Half the net tax | As calculated |
| Very large | Half of a large number | Capped at the maximum |
A refund position does not avoid the requirement. The calculation uses net tax whether it is positive or negative, so an exporter expecting refunds every quarter still posts security based on the size of that figure. Registering specifically to recover input tax credits therefore has a cash cost attached before any recovery begins.
The Exception Has Two Tests
Security is generally not required for a genuinely small operation, but the relief has two conditions and both have to be satisfied. Taxable supplies in Canada must be under the supplies threshold, and estimated net tax must sit within a narrow band either side of zero.
A business can easily meet one and fail the other. Low supplies with an unusual net tax position, or a modest net tax figure on larger supplies, both fall outside it. The test is conjunctive rather than a choice between two routes.
What Can Be Posted
Cash and certified funds are the straightforward route and the one most non-residents take. A surety bond from an acceptable institution keeps the working capital free, at the cost of an annual premium and the underwriting that goes with it.
Which is better is a financing question rather than a tax one. Where the deposit is large and will be held for years, a bond premium is often cheaper than the return foregone on the cash. Where it is near the floor, the administration of arranging a bond usually outweighs the benefit.
The deposit is not a payment and it is not a deposit against tax. It sits as security, it is not applied to your remittances, and it does not reduce anything you owe. Treating it as prepaid tax in the cash-flow model is a common and expensive modelling error.
Getting It Back
Security is held while the registration is active and the reason for it persists. It is reviewed as actual figures become available, so a registrant whose net tax turns out lower than estimated can ask for the amount to be reduced rather than waiting passively.
Release generally follows the registration being cancelled and all obligations being settled, or the registrant establishing a Canadian presence such that the requirement no longer applies. A clean filing history is what makes those conversations straightforward.
Practical Points
- Budget the deposit into the launch cost, because registration does not complete until it is received
- Estimate net tax carefully, since a high estimate ties up cash unnecessarily for a year
- Ask for a review once actuals are known, rather than leaving an inflated amount in place
- Compare a bond against the cash where the amount is substantial and long-held
- Keep the filing history clean, since it drives every later conversation about the amount
- Revisit if a Canadian establishment is created, because the basis for the requirement may fall away
What This Calculator Does Not Cover
- Whether you are required to register at all, which turns on your supplies and where they are made
- Whether you carry on business in Canada, which is a factual determination
- The simplified registration regime for certain cross-border digital and platform supplies
- Place of supply rules, which decide which rate applies to what
- Import GST and customs, which run on their own footing
- Whether a particular form of security will be accepted, which the Agency determines
The deposit is usually the surprise in a non-resident registration rather than the tax itself. Our GST/HST registration service covers the application, the security negotiation, the estimate that sets the amount and the later review to bring it down.
Frequently Asked Questions
Common questions on security for non-resident GST/HST registration.
Related Calculators and Guides
More tools for non-residents dealing with Canadian sales tax.
The Estimate Sets the Deposit, So Get It Right
Send us your projected Canadian supplies and input tax credits. We will prepare the registration, build a defensible net tax estimate so the deposit is not larger than it needs to be, advise on cash against a bond, and seek a reduction once actual figures are available.