GST/HST penalties and interest in Canada: the late-filing formula of 1% plus 0.25% per month to 12 months, the $250 demand penalty, $100 and $250 paper-filing penalties, the 5% to 10% inaccurate-reporting penalty, daily-compounded interest, and taxpayer relief on Form RC4288.
Applies in: across Canada
GST/HST penalties punish the late return, interest punishes the unpaid balance, and the two meters run independently. A late return with an amount owing draws a penalty of 1% of the amount owing plus 0.25% of the amount owing for each complete month late, capped at 12 months, for a maximum of 4%. Interest runs at the prescribed annual rate, compounded daily, from the payment due date until the balance is paid. On top of those two meters sit fixed penalties: $250 for ignoring a demand to file, $100 then $250 for paper returns where electronic filing is required, and 5% to 10% for inaccurate reporting of specified amounts on an electronic return. Relief exists for extraordinary circumstances beyond the taxpayer's control, but it is discretionary, requested on Form RC4288, and never a reason to delay filing.
This guide is the computation companion to the late-filing guide, which covers what happens when a return is missed and the recovery sequence. That guide tells the story of a missed deadline; this one sets out every penalty and interest charge in the CRA's schedule, how each is calculated, and how relief is requested. It is general information about a public tax process, not tax advice for a particular file.
The distinction drives every decision in this guide. The late-filing penalty attaches to the return: it is charged because the return was filed late, and its size depends on the amount owing on that return and on how many complete months late it was. Interest attaches to the balance: it is charged because an amount remained unpaid after its due date, and its size depends on the balance, the prescribed rate, and the number of days unpaid. Filing on time with an unpaid balance skips the penalty entirely and leaves only interest running. Paying in full without filing leaves the return overdue and the penalty running. Filing late and paying late draws both.
The meters also start at different dates, and the difference bites annual filers. For monthly and quarterly filers, the return and the payment share one deadline, one month after the end of the reporting period, so the distinction rarely matters. For annual filers who are individuals with a December 31 year-end, the return is due June 15 but the payment is due April 30, so interest starts on any unpaid balance on May 1, and filing on time on June 10 does not stop six weeks of interest. Annual filers with net tax of $3,000 or more also pay quarterly instalments, each due one month after the end of a fiscal quarter, and late or insufficient instalments draw interest at the same prescribed rate. Know which date each meter starts from before deciding what to file first.
The CRA calculates the failure-to-file penalty as A plus B times C. A is 1% of the amount owing on the return. B is 25% of A, which is 0.25% of the amount owing. C is the number of complete months the return is overdue, to a maximum of 12. The penalty therefore grows by one monthly slice per complete month, and stops growing at 12 months, where it totals 4% of the amount owing: 1% plus 0.25% times 12.
Three worked examples show the scale. A balance of $2,000 filed 3 complete months late draws a penalty of $20 plus $5 times 3, which is $35. A balance of $50,000 filed 6 complete months late draws $500 plus $125 times 6, which is $1,250. A balance of $10,000 filed 12 or more complete months late draws the maximum, $100 plus $25 times 12, which is $400. The penalty does not apply at all where the return shows no amount owing or the CRA owes a refund on that return, although the return itself remains legally required for every period. And only complete months count: a return two weeks late carries the 1% base only, so filing this week instead of next month always saves the next monthly slice. Each reporting period carries its own penalty, so two missed quarterly returns draw two penalties, not one combined penalty.
Interest is charged on an overdue balance owing on a return, and on late or insufficient instalment payments, at the prescribed annual rate. Both penalty and interest imposed under the GST/HST rules are compounded daily under section 124 of the Excise Tax Act, so the effective annual cost runs slightly above the stated rate. The prescribed rate is set quarterly: for October 1 to December 31, 2026, the CRA announced 7% on overdue taxes, and the same quarter's arrears and instalment interest rate for GST/HST purposes stood at 7%. The rate resets every quarter, so a balance that spans a quarter boundary is charged at the rate in force for each part of the period, and any guide that states a rate without a date range is already out of date for the next quarter.
The same worked examples show why interest, not the penalty, is usually the larger cost on a large balance. At 7% compounded daily, interest on $2,000 for about 92 days is roughly $36, beside a $35 penalty, for a total of about $71. Interest on $50,000 for about 183 days is roughly $1,786, beside a $1,250 penalty, for a total of about $3,036. Interest on $10,000 for a full year at 7% compounded daily is roughly $725, beside the $400 maximum penalty. The pattern is consistent: the penalty is small and capped, while interest is uncapped and compounds every day until the balance is paid. Paying the balance, even before the return is ready, stops the larger meter; filing the return stops the smaller one. Do both, in whichever order the cash allows, and do not wait for one to do the other.
The demand penalty is the first fixed charge. If the CRA issues a demand to file a return and the person does not file, a penalty of $250 is charged, in addition to other penalties that may apply. It applies even where nothing is owing, which makes it the most expensive charge available against a nil filer who ignores correspondence. A penalty paid for failing to file a GST/HST return cannot be claimed as an income tax deduction. The response to a demand is to file, even late, even without payment: filing ends the demand exposure, and payment arrangements can follow.
The electronic filing penalty is the second fixed charge. For reporting periods beginning on or after January 1, 2024, all GST/HST registrants except selected listed financial institutions and most charities must file electronically. A paper return filed where electronic filing is required draws $100 for the first return and $250 for each subsequent return. The charge is per return, so a business that files quarterly on paper can draw $100, then $250, then $250 again, in successive quarters. Filing through GST/HST NETFILE or an authorized representative avoids it entirely, and the penalty is separate from, and additional to, any late-filing penalty on the same return.
The inaccurate reporting penalty is the third fixed charge, and it is the only one stated as a range. Where an electronically filed return omits required information, makes a false statement, or reports specified amounts incorrectly, the penalty is generally at least 5% and up to 10% of the incorrect amount: 5% of the difference between what was reported and what should have been reported, plus 1% per month of that difference until the amounts are corrected. The specified amounts include recaptured input tax credits, resales of housing subject to HST bought on a grandparented basis, the transitional tax adjustment, and provincial transitional new housing rebates. Correcting a known error promptly caps the monthly addition at the months already elapsed; leaving the error for the next return lets the monthly addition keep running.
The CRA administers taxpayer relief provisions giving it discretion to cancel or waive penalties and interest where a taxpayer was unable to meet their obligations due to circumstances beyond their control. The CRA's own examples of such circumstances include natural disaster, serious illness, and CRA error or delay. Relief is discretionary and never guaranteed, and interest is generally harder to have relieved than penalties, since the CRA treats interest as compensation for the time the money was outstanding rather than punishment for the failure. A difficult year, a busy period, or a misunderstanding of a deadline is not, on its own, an extraordinary circumstance, and a request that does not name the circumstance and show how it prevented compliance will not succeed.
The request itself is made on Form RC4288, Request for Taxpayer Relief, or online through My Business Account, My Account, or Represent a Client. The CRA's discretion is limited to any period that ended within 10 calendar years before the year the request is made: for penalties, the request must relate to a tax year or fiscal period ending in the 10 calendar years before the request year, and for interest, only amounts that accumulated in those 10 years are considered. A request made in 2026 must therefore relate to a period ending in 2016 or later, and to interest that accumulated in 2016 or later. File the outstanding returns and pay what can be paid before requesting relief, since relief addresses amounts already assessed, and a request does not stop interest from running while it is considered. Where the CRA has not yet contacted the taxpayer about the failure, the Voluntary Disclosures Program is a separate route to consider before a demand issues, since coming forward voluntarily can lead to penalty relief that is no longer available once the CRA has made contact.
In Quebec, Revenu Québec administers QST alongside GST/HST, and late-filing consequences for QST follow Revenu Québec's own penalty and interest regime, not the CRA formula in this guide. A business filing both taxes must handle each side under its own rules: a CRA demand to file covers the GST/HST return only, a CRA relief request covers CRA-administered penalties and interest only, and the prescribed rates, demand penalties, and relief routes for QST are set by Revenu Québec. Do not apply the 1% plus 0.25% formula, the $250 demand figure, or the RC4288 route to a QST balance without checking Revenu Québec's own publications first.
| Late-filing penalty, base | 1% of the amount owing |
|---|---|
| Late-filing penalty, monthly addition | 25% of the base per complete month late, maximum 12 months (4% total) |
| Demand to file ignored | $250, on top of other penalties and interest |
| Paper return when electronic filing is required | $100 first return, $250 each subsequent return |
| Inaccurate reporting on an electronic return | 5% of the incorrect amount plus 1% per month until corrected, maximum 10% |
| Interest on overdue amounts, October 1 to December 31, 2026 | 7% per year, compounded daily |
The penalty is A plus B times C, where A is 1% of the amount owing on the return, B is 25% of A, which is 0.25% of the amount owing, and C is the number of complete months the return is overdue, to a maximum of 12 months. At 12 months the penalty tops out at 4% of the amount owing. The penalty does not apply where the return shows no amount owing or the CRA owes a refund on that return, although the return itself is still required. Only complete months count, so a return two weeks late carries the 1% base only, while a return two months and two weeks late counts two complete months.
Interest is charged separately from penalties, on overdue balances and on late or insufficient instalments, at the prescribed annual rate, compounded daily. The prescribed rate is set quarterly. For October 1 to December 31, 2026, the CRA announced 7% on overdue taxes, and the Excise Tax Act rules compound both penalty and interest daily. Interest runs from the payment due date, not the filing date, which matters for annual filers whose payment date and filing date differ. Because the rate resets every quarter, always check the current quarter's prescribed rate rather than relying on the rate in an older guide.
If the CRA issues a formal demand to file a return and the person does not file, a penalty of $250 is charged, in addition to any late-filing penalty and interest that apply. The demand penalty applies even where nothing is owing, which is the trap for nil filers: a nil return carries no late-filing penalty, but an ignored demand still costs $250. A penalty paid for failing to file a GST/HST return cannot be claimed as an income tax deduction. The way to avoid the demand penalty is to file on receiving the demand, even if the return is late and the balance cannot yet be paid.
Yes, where electronic filing is required. For reporting periods beginning on or after January 1, 2024, all GST/HST registrants except selected listed financial institutions and most charities must file electronically. A paper return filed where electronic filing is required draws a penalty of $100 for the first return and $250 for each subsequent return. Filing electronically through GST/HST NETFILE, or through an authorized representative, avoids the penalty entirely. The paper penalty is separate from the late-filing penalty, so a late paper return can draw both.
For electronically filed returns, the CRA may charge a penalty where required information is omitted, a false statement is made, or certain amounts are reported incorrectly, including recaptured input tax credits, resales of housing subject to HST bought on a grandparented basis, the transitional tax adjustment, and provincial transitional new housing rebates. The penalty is generally at least 5% and up to a maximum of 10%, made up of 5% of the incorrect amount plus 1% per month of the difference between what was reported and what should have been reported, until the amounts are corrected. Correcting the return promptly caps the monthly addition, which is the practical reason to fix a known error rather than leaving it for the next period.
In some extraordinary circumstances, yes, under the taxpayer relief provisions. The CRA has discretion to cancel or waive penalties and interest where a taxpayer was unable to meet their obligations due to circumstances beyond their control, such as a natural disaster, serious illness, or CRA error or delay. Relief is discretionary and never guaranteed, and interest is generally harder to have relieved than penalties. The request is made on [Form RC4288](https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/rc4288.html), or online through My Business Account, and the CRA's discretion is limited to periods ending within the 10 calendar years before the year the request is made. File the return and pay what can be paid first: relief is a request about amounts already assessed, not a substitute for filing.