Early/Late Payments

GST/HST Memorandum 3-9
February 2024

This version replaces GST Memorandum 300-7-8, Early/Late Payments dated February 1991.

Except as otherwise noted, all statutory references in this publication are to the provisions of the Excise Tax Act (ETA). The information in this publication does not replace the law found in the ETA and its regulations.

If this information does not completely address your particular situation, you may wish to refer to the ETA or relevant regulation, or call GST/HST Rulings at 1‑800‑959‑8287 for additional information. If you require certainty with respect to any particular GST/HST matter, you may request a ruling. GST/HST Memorandum 1-4, Excise and GST/HST Rulings and Interpretations Service, explains how to obtain a ruling or an interpretation and lists the GST/HST rulings centres.

If you are located in Quebec and wish to request a ruling related to the GST/HST, please call Revenu Québec at 1‑800‑567‑4692. You may also visit the Revenu Québec website at revenuquebec.ca to obtain general information.

For listed financial institutions that are selected listed financial institutions (SLFIs) for GST/HST or Quebec sales tax (QST) purposes or both, whether or not they are located in Quebec, the CRA administers the GST/HST and the QST. If you wish to make a technical GST/HST or QST enquiry related to SLFIs, please call 1-855-666-5166.

GST/HST rates

Reference in this publication is made to supplies that are subject to the GST or the HST. The HST applies in the participating provinces at the following rates: 13% in Ontario and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%. If you are uncertain as to whether a supply is made in a participating province, refer to GST/HST Technical Information Bulletin B-103, Harmonized Sales Tax – Place of Supply Rules for Determining Whether a Supply is Made in a Province.

Table of contents

• General
• Consideration
• Early and Late Payments
• Early Payment Discounts
• Late Payment Charges

General

1. Subsection 165(1) generally requires every recipient of a taxable supply, other than a zero-rated supply, made in Canada to pay tax in respect of the supply calculated at the rate of 5% on the value of the consideration for the supply.

2. For information on determining whether a supply is made in Canada, refer to GST/HST Memorandum 3-3, Place of Supply.

3. In addition to tax imposed under subsection 165(1), subsection 165(2) generally requires every recipient of a taxable supply, other than a zero-rated supply, made in a participating province, to pay tax in respect of the supply calculated at the tax rate for that province on the value of the consideration for the supply.

4. For information on whether a supply is made in a participating province, refer to GST/HST Technical Information Bulletin B-103 Harmonized Sales Tax – Place of supply rules for determining whether a supply is made in a province.

Consideration

5. For GST/HST purposes, consideration is defined in subsection 123(1) to include “any amount that is payable for a supply by operation of law.”

6. In general, consideration may be money, a thing, a service, forbearance in the exercise of a right or anything else which induces the supplier to make the supply.

7. Subsection 154(2) provides that the consideration for a supply does not include the GST/HST payable in respect of the supply or a prescribed provincial levy under the Taxes, Duties and Fees (GST/HST) Regulations.

8. For more information on the value of consideration for a supply, refer to Memorandum 300-7 Value of Supply.

Early and Late Payments

9. A supplier of tangible personal property or services may offer customers a discount for early payment or impose an additional charge for late payment on an invoiced amount. In such a case, it is important to determine the value of consideration on which the GST/HST must be calculated (for example, the original invoiced amount not including the early payment discount or late payment charge or the original invoiced amount including the discount or the late payment charge).

10. Under section 161, where tangible personal property or services are supplied and the amount of consideration for the supply shown in the invoice in respect of the supply may be reduced if the amount is paid within a time specified in the invoice, or an additional amount is charged to the recipient by the supplier if the amount of the consideration is not paid within a reasonable period specified in the invoice, the consideration due shall be deemed to be the amount of consideration shown in the invoice.

Early Payment Discounts

11. An early payment discount occurs when a supplier gives a reduction to the recipient on the amount of consideration payable for a supply when the amount is paid within the time period specified on the invoice.

12. Where an invoice for a supply of tangible personal property or a service specifies an offer of a discount for early payment, the consideration due is deemed to be the amount shown on the invoice. The tax is payable on the value of the consideration shown on the invoice, even if the recipient subsequently takes advantage of the early payment discount.

13. When the amount invoiced is already net of the early payment discount, the tax is payable on the invoiced amount which is the reduced amount.

Late Payment Charges

14. A late payment charge occurs when a supplier charges the recipient of the supply an additional amount if the amount of consideration payable for the supply is not paid within a reasonable period specified on the invoice.

15. Where an invoice for a supply of tangible personal property or a service indicates that an additional amount will be charged if payment is not received by the specified date, the consideration due is deemed to be the amount shown on the invoice. The tax is payable on the value of the consideration shown on the invoice whether or not the late payment charge is imposed and paid.

16. When the consideration shown on an invoice includes an amount to compensate the supplier for payments that are not received on time, tax will be payable on the invoiced amount, which includes the additional charge.

Further information