Do you accept credit card payment from your customers and would like to pass the cost to your customers? If so, how should you apply the tax code to the additional fees? Should you collect GST/HST on this fees like other services you are providing? Read this post about the announcement made by CRA.
Historic Change on Credit Card Fees Policy
In the past, when a merchant accepted credit card as a payment form, it was not allowed to pass the credit card processing fee to the customers; it had to absorb the cost itself. Starting October 2022, Canadian merchants are now allowed to add a surcharge to cover the cost of accepting VISA/MasterCard payments. This is part of the calss-action lawsuit settlement between VISA/Mastercard and Canadian merchants.
Since the lawsuit only targeted VISA and Mastercard, other credit card processors, like AMEX, were not affected by the new rule. Canadian merchants still cannot pass AMEX credit card fees to their customers.
After the change of the rule, there was a uncertainty over whether GST/HST applies to the new surcharges. If the products and services being sold are subject to GST/HST, should merchants apply GST/HST on the newly added fees as well?
No GST/HST on Credit Card Surcharges
In March 2023, CRA clarified its position on the GST/HST issue. CRA clearly stating that the credit card surcharge will be GST/HST exempt. In other words, customers don’t have to pay additional GST/HST on the surcharge if they decide to pay by credit cards.
If your business has collected GST/HST on the credit card surcharge by mistakes, you could either remit them to CRA or refund it to the customers.
Not sure to how setting tax code on your invoice setting? Consult your bookkeeper. If you are not satisfied with your current bookkeeper, TaxWise Service provides professional bookkeeping services too.
Additional Notes
There are rules regarding the maximum rate that you can charge your customers. In addition, the amount must be clearly stated on the invoice and customers must have the right to opt out by choosing another payment method.
For more information, please see the following link:
https://ingenico.com/ca-en/newsroom/blogs/canada-credit-card-surcharges-pros-cons-and-solutions