What is the difference between zero-rated and exempt supplies?
A zero-rated supply is inside the tax and charged at nil. An exempt supply is outside it. The distinction looks academic on the sales invoice, where both show no tax, and it is decisive on the purchase side. A business making zero-rated supplies is making taxable supplies, so it can recover the tax on the costs behind them and will often be in a repayment position. A business making exempt supplies cannot, so the tax on its costs stays with it. The same nil on the invoice, a very different result at the foot of the return.
Can I claim input tax if all my sales are zero-rated?
Yes, that is the point of zero-rating. The supply remains a taxable one, so the costs incurred in making it carry recoverable tax in the ordinary way. In practice a business in that position files returns claiming more than they pay, which is perfectly normal and also the reason such claims attract attention. Recovery survives the review if the file shows that the sales really did qualify. It is the evidence for the nil rate, rather than the arithmetic of the claim, that decides the outcome.
Do I have to register if everything I sell is zero-rated?
Usually yes, and often you will want to. Zero-rated sales are taxable supplies, so they generally count when a registration test is applied, even though they generate no tax to pay. Registration is also what makes input tax recoverable, so staying outside the system while making zero-rated supplies tends to cost money rather than save it. The test itself is local, so the answer has to be taken from the rules of the country where the supplies are treated as made.
Are exports automatically zero-rated?
No. The rate depends on meeting the conditions the local rules attach to it, and those conditions are largely evidential. Goods generally have to have left, and the file has to be able to show it, with the shipping and customs documents naming the right parties and matching the invoice. A sale to a foreign customer whose goods never crossed a border is not an export. Where the documents are thin, the assessment that follows treats the sale as taxable at the standard rate, with the tax coming out of a price that never included it.
Why was my refund claim queried when all my sales are zero-rated?
Because a repayment claim is where an authority looks hardest, and a zero-rated business files one most periods. The query is usually about proof rather than principle. Expect to be asked for the evidence that each sale qualified, for the link between the costs claimed and those sales, and for an explanation of anything used partly for something else. Claims are held up far more often by missing paperwork than by a wrong legal position. Assembling that evidence as the sales happen is what turns a query into a short exchange.
Does a zero-rated invoice still have to show the rate?
Generally it has to show something. Most systems want the supply identified as zero-rated rather than simply silent on tax, because a blank invoice does not distinguish a nil-rated taxable supply from an exempt one, or from a supply the customer must account for itself. What the wording has to say is set locally, and it is worth getting the template right once. A customer's own adviser will read that line to decide how to treat the purchase, and an inconsistent set of invoices invites the question that follows.
How much foreign income is tax-free in Canada?
None of it is tax-free for being foreign. A Canadian resident is taxed on worldwide income, so foreign salary, interest, dividends, rent and gains all go on the return, converted to Canadian dollars. What genuinely reduces the bill is the basic personal amount, the credit for foreign tax already paid, and any treaty article that exempts a specific type of income. The reporting thresholds people have in mind — the foreign property statement, for one — govern reporting, not exemption. See the foreign tax credit.
Can an accountant in one country file my return in another?
Yes, where they are authorised to represent you with that tax authority and the filing is done electronically. What matters is not where the adviser sits but whether they can lawfully act for you and are competent in both systems — a return prepared with no knowledge of the other country is where the relief gets missed. We file on both sides, from offices in India, the USA, Canada and the UAE. See how we work.
