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For Canadian GST/HST registrants, a late return and an unpaid balance can create two different charges. The Canada Revenue Agency (CRA) may assess a late-filing penalty when tax is owing, while arrears interest runs separately on overdue amounts and compounds daily. The penalty and interest rules are not the same, and relief is discretionary rather than automatic.
This guide covers Canadian GST/HST administered by the CRA. GST rules in other countries are different.
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What the CRA can charge when a GST/HST return is late
The first question is whether the return was filed after its due date and whether the registrant owed GST/HST. The CRA states: “If you file after your due date and you owe money, you may be charged a late-filing penalty.” See the CRA’s GST/HST filing penalties guidance.
That filing penalty is distinct from interest. A late return can attract the filing charge, an unpaid balance can attract arrears interest, and a registrant may need to make a separate relief request. Each issue has its own trigger and calculation.
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How the GST/HST late-filing penalty is calculated
The CRA formula is:
Late-filing penalty = A + (B × C)
- A is 1% of the amount owing.
- B is 25% of A.
- C is the number of complete months the return is overdue, capped at 12 months.
| Formula element | CRA rule | What it means in practice |
|---|---|---|
| A | 1% of the amount owing | The starting charge is tied to the GST/HST balance reported as owing. |
| B | 25% of A | This produces the monthly increment used in the formula. |
| C | Complete overdue months, maximum 12 | Only complete months count, and the monthly portion cannot continue beyond 12 months. |
The CRA says it does not charge this late-filing penalty when the registrant owes $0 or is due a refund. That rule concerns the filing penalty; it does not turn the return deadline into an optional date, and it does not address other possible assessments.
Illustrative calculation
Suppose a return shows $10,000 owing and is three complete months late. A is 1% of $10,000, or $100. B is 25% of $100, or $25. C is three. The formula gives $100 + ($25 × 3) = $175.
This is an illustration of the CRA formula, not a statement of a particular registrant’s assessment. Your notice may use the amount the CRA determines to be owing and the exact number of complete overdue months.
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Why the 12-month cap matters
The formula’s monthly component stops at 12 complete months. A return that remains outstanding longer can still leave the underlying tax unpaid and can continue to generate arrears interest, but the filing-penalty formula itself does not use more than 12 months for C.
Late-filing penalty versus arrears interest
Interest is a separate cost on an overdue GST/HST balance. The CRA explains that arrears interest is charged on overdue amounts at a prescribed rate set every three months, with interest compounded daily. Its GST/HST payment guidance also says a registrant can view a balance, including interest calculated to a selected date, through the CRA account and can contact the agency if payment in full or on time is not possible.
| Issue | Trigger | How it is determined | Can it continue? |
|---|---|---|---|
| Late-filing penalty | The return is filed after its due date and tax is owing. | 1% of the amount owing plus 25% of that 1% for each complete overdue month, up to 12 months. | The formula’s month count is capped at 12. |
| Arrears interest | A GST/HST balance remains overdue. | A prescribed rate set quarterly; interest compounds daily. | It can continue while the amount remains overdue, subject to the CRA’s account calculations. |
| Relief request | The registrant asks the CRA to cancel or waive eligible penalties or interest. | The Minister considers the circumstances and the applicable relief rules. | Relief is discretionary and is not guaranteed. |
The dated interest rate available for 2026
CRA Excise and GST/HST News No. 123 reports an annual arrears-interest rate of 7% for July 1 through September 30, 2026 on overdue amounts payable to the Minister. That is a quarter-specific figure. It does not establish the rate for October 1 through December 31, 2026, so do not treat 7% as the current rate for a later quarter without checking the CRA’s next notice.
Because interest compounds daily, the amount shown for one date can differ from the amount shown for a later date even if no new tax is assessed. Use the balance and interest calculation in your CRA account for a date-specific figure rather than estimating from an old notice.
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- File the outstanding GST/HST return promptly. Filing stops the return from remaining unfiled and gives the CRA the information needed to determine the balance, refund, or zero amount.
- Identify the amount owing. The filing penalty is connected to whether tax is owing. Confirm the amount on the return and compare it with the balance in your CRA account.
- Pay what you can as soon as possible. Payment reduces the overdue balance on which arrears interest is calculated. If you cannot pay in full or on time, contact the CRA rather than ignoring the account.
- Check the account after processing. Review the assessed balance and interest calculated to the date you select. Keep the return, payment confirmation, and CRA notices together.
- Consider relief only if there are qualifying circumstances. A relief request is a separate process; filing and paying do not automatically create a waiver.
Do not wait for a penalty notice before filing. The filing obligation and the CRA’s ability to assess interest continue even when correspondence has not yet arrived.
Can the CRA cancel or waive GST/HST penalties or interest?
Yes, the CRA says the Minister may cancel or waive certain penalties and interest in appropriate circumstances. The authority is discretionary: submitting a request does not mean it will be approved, and financial difficulty by itself is not a promise of relief.
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The CRA describes the process in its Cancellation or Waiver of Penalties and Interest guidance and its page explaining who can apply.
The 10-year time limit
The request must relate to amounts within the 10-year period ending in the calendar year in which you make the request. For example, a request made in 2026 is assessed against that 10-year window under the CRA’s stated rule. Keep the dates of the filing, assessment, payment, and any event you rely on so the CRA can match your explanation to the relevant period.
How to submit a request
CRA guidance describes online account submission routes and Form RC4288, Request for Taxpayer Relief—Cancel or Waive Penalties and Interest. Use the current instructions in your CRA account or on the form, and identify the GST/HST program account and the exact periods and amounts involved.
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A useful request is specific rather than conclusory. Explain:
- which return, assessment, penalty, or interest amount is at issue;
- what event prevented timely filing or payment;
- when the event occurred and when you took corrective action;
- what steps you have taken to prevent a repeat; and
- which documents support the explanation.
Send records that establish the facts you describe, such as relevant correspondence, payment evidence, or documentation of an event affecting your ability to meet the deadline. Keep copies of the submission and delivery confirmation.
A penalty that the described relief route excludes
The CRA’s eligibility guidance identifies the GST/HST gross-negligence penalty under section 285 of the Excise Tax Act among amounts that do not qualify for relief under the taxpayer-relief provisions described on that page. Do not assume that a request can remove every type of GST/HST penalty.
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| Your situation | Primary question | Likely next action |
|---|---|---|
| Return filed late with tax owing | How many complete months late was it, and what amount did the CRA determine was owing? | Apply the CRA formula, file or confirm processing, and pay the balance. |
| Return filed late with a zero balance | Was the balance actually $0 when assessed? | Check the CRA account; the CRA says the described late-filing penalty is not charged when the balance is zero. |
| Return shows a refund | Did the CRA accept the refund position? | Review the account and notices; the CRA says the described late-filing penalty is not charged when a refund is due. |
| Return filed, but tax remains unpaid | What arrears interest has accumulated to the payment date? | Use the CRA account’s date-specific balance and arrange payment or contact the CRA. |
| Penalty or interest arose after an exceptional event | Does the amount fall within the 10-year window and the eligible relief rules? | Submit a documented request online or with Form RC4288. |
| Gross-negligence penalty under section 285 | Is this the penalty type identified as excluded from the described relief provisions? | Review the assessment and obtain qualified Canadian tax advice before relying on taxpayer-relief rules. |
Ways to prevent another GST/HST penalty
- Put each GST/HST filing deadline and payment deadline on a calendar with an earlier internal target.
- Separate GST/HST collected from operating cash so the remittance is available when due.
- Reconcile sales, purchases, input tax credits, and the GST/HST return before submitting it.
- Keep proof of filing and payment, including the date, amount, and confirmation number.
- Review the CRA account after each filing to catch an assessed balance or interest before it grows.
- Contact the CRA promptly when a full payment is not possible; delaying contact does not stop daily compounding interest.
When professional help is worthwhile
Consider a qualified Canadian tax professional when the return involves multiple reporting periods, a disputed amount, a gross-negligence assessment, complex input-tax-credit issues, or a relief request that depends on detailed evidence. A professional can help distinguish a filing dispute from a payment problem, but no adviser can guarantee that the CRA will cancel a penalty or interest.
For a straightforward late return, the essential sequence is still the same: file, verify the assessed balance, pay or arrange payment, and make a separate, documented relief request if the facts support one.
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