A zero-rated supply is a good or service taxed at 0% GST/HST, meaning no tax is charged to the customer but the seller can still claim input tax credits on related costs.
Zero-rated supplies are technically taxable at 0%, which is very different from exempt supplies. Because they are taxable, the seller charges no GST/HST to the customer and keeps the right to claim input tax credits on the tax paid to produce them, the most favourable GST/HST outcome.
Common zero-rated categories include basic groceries, prescription drugs, most exports of goods and services, and certain agricultural and medical items. This is why exporters often sit in a persistent refund position, they charge no tax but recover all the GST/HST on their Canadian costs.
A Canadian company exports software to a US client. The sale is zero-rated, so it charges 0% tax, but it still claims input tax credits on the GST/HST it paid on its own Canadian expenses, generating a refund.
Our certified accounting firm handles this for businesses and individuals across Canada, at fixed fees with no surprises.
Book a Free 15-Minute CallCommon questions regarding our compliance workflows and service guarantees.