What are the penalties for filing GST/HST late?

The late-filing penalty formula

Where a return shows an amount owing and is filed after its due date, the CRA applies a late-filing penalty. This is built from a base percentage of the amount owing, plus an additional percentage for every full month the return remains outstanding. That additional percentage applies up to a maximum number of months. A registrant who consistently files late faces a steeper penalty the second time. This is because the CRA can apply a higher rate to a repeat late filer within a set period. That makes a single late return worth treating as a signal to fix the underlying process, rather than a one-off inconvenience.

As at the time of writing, we are deliberately not quoting the exact percentages here, since penalty rates are set by the CRA. They are the kind of figure worth confirming directly before you rely on it for planning. This matters particularly if you are deciding whether to file now at an estimated amount or wait for a final number. In our experience, filing an estimated return on time and correcting it afterward is generally a better position than waiting for a perfect number and filing late.

The penalty is calculated on the return itself, not on the account as a whole. A business with several outstanding periods faces this calculation separately for each one. The total can add up faster than expecting a single flat charge for being generally behind. This is a big part of why catching up sooner rather than later usually costs less overall, even before interest is added into the picture.

Interest, demands to file, and held refunds

Separately from the late-filing penalty, interest compounds daily on any unpaid balance from the day after it was due. This is calculated at the CRA's prescribed interest rate, which is set quarterly and changes over time. Confirm the current prescribed rate before estimating what a late balance will actually cost by the time it is paid. A balance left outstanding for several quarters can accumulate meaningfully more interest than a rough back-of-envelope estimate would suggest.

If a registrant does not file after being asked to, the CRA can issue a formal demand to file. Failing to comply with that demand carries its own separate penalty, on top of the late-filing penalty already discussed. Again, confirm the current dollar figure for this specific penalty, rather than assuming a number. The CRA will also generally hold any GST/HST refund you would otherwise be owed, until every outstanding return has actually been filed. This applies even if the refund relates to a different, current period. It means a business that is behind on older returns cannot simply file the current one and expect the refund to be released on its own.

Director liability for unremitted GST/HST

A corporation might collect GST/HST from customers but fail to remit it to the CRA. If so, its directors can potentially be held personally liable for that unremitted amount. This is similar to the personal liability that can attach to unremitted payroll source deductions. This liability generally applies to amounts the corporation actually collected and failed to hand over, not simply to a return filed late with no tax collected. It is a more serious situation than an ordinary late-filing penalty. This is because it can follow a director personally, even after the corporation itself has stopped operating.

Directors facing this kind of exposure should get advice specific to their situation promptly, rather than waiting. The rules around notice periods and available defences are detailed enough that a general summary here would not do them justice. The position only gets harder to unwind the longer the unremitted amount sits outstanding. A director who resigns from a corporation does not automatically walk away from this exposure either. Liability can attach to amounts that were collected and went unremitted, while they were still acting in that role.

Relief options if you are behind

The CRA's taxpayer relief provisions can, in some circumstances, cancel or waive penalties and interest. This generally applies where the delay was caused by something outside the registrant's control, rather than simple oversight. Where the issue involves multiple years of unfiled or inaccurate returns, the Voluntary Disclosures Program may allow a registrant to come forward and correct the record. Doing so comes with reduced penalty exposure, provided the disclosure is made before the CRA has already started looking into it.

Neither option guarantees relief, and both work better the earlier they are used. A business that realizes it is behind is generally better off addressing it directly, rather than waiting for a CRA notice to arrive first. A relief application also tends to land better when it comes with the outstanding returns already filed. It should not simply ask to be excused from filing them at all. Instead, it should generally set out clearly what happened and what has changed, to prevent the same delay from recurring.

How we handle catching clients up on late GST/HST

We help clients work through unfiled bookkeeping and returns methodically, oldest period first. This way, the total exposure is known before deciding whether to approach the CRA proactively, or simply file and pay what is owed. Getting current on filing, even before every dollar is paid, generally matters more for stopping additional penalties than waiting until the full balance can be paid at once. Our CRA problem resolution work often runs alongside a payment plan. That way, the filing catch-up and the cash flow side are handled together, rather than treated as separate problems.