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|[[config.taxes[index + 1].titleTotal]] ([[data.taxes[index].rate]]%)||[[toCurrency( getTotalForTax(index), true ) ]]|
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While creating an invoice is routine for established businesses, it can be a confusing responsibility for new businesses and freelancers.
Not sure how to get started writing an invoice? You are in the right place!
HelloSafe’s free invoice template tool will help you quickly generate error-free, CRA-compliant invoices. Once finished, you can download your invoices as a PDF. Continue below to learn about the legal requirements for invoices in Canada, how they work, what you need to include and how to apply taxes.
What is an invoice?
An invoice is simply a paper or electronic record of a commercial transaction between a buyer and seller. It describes the product or services sold, the quantity and their price.
Invoices are essential documents for businesses that allow them, as sellers, to request payment and define the payment terms. They are a legal requirement for accounting and tax purposes.
Do I need to create an invoice?
The Canadian government requires businesses to create invoices for all commercial transactions. This is true regardless of the sales amount. Invoices serve as a legal record of a transaction.
Fortunately, invoicing a client is not difficult. Below we explain what needs to appear on an invoice.
What is included on an invoice in Canada?
A Canada Revenue Agency-compliant invoice is required to include the following information:
- The seller’s name
- The seller’s business number, or GST/HST account number (learn how to register)
- The buyer’s name
- A description of the goods and/or services
- The quantity of the goods or services
- The price of the goods and/or services
- If GST/HST is being applied, and, if so, at what rate
- The date of invoice
- The return policy if the sale includes returnable goods
- A unique invoice number identifying the transaction
- The payment terms*
*Payment terms describes when payment is due and how. Commonly companies include 30 days upon receipt of the invoice or payable upon receipt. Other companies will write 1% net 30 to indicate a 1% discount if it is paid within 30 days. This serves as an incentive to the buyer to pay more quickly, and can be advantageous for the seller’s cash flow.
A completed invoice could look like this:
How do I make an invoice?
Do you need to write an invoice, but are not sure where to start? Creating a professional invoice has never been easier. There are many specialized paid tools and services for making invoices. Free templates for software like Microsoft Word and Excel or Google Docs and Sheets can do the job too.
We believe that the simplest way to get started is by using HelloSafe’s free invoice creation tool above.
To create your first invoice:
- Fill out the sections highlighted in light blue with the specific information for your transaction.
- Activate columns for quantity and units as needed under settings.
- Add on GST/HST, other provincial taxes and their amounts, as appropriate, under the settings.
Beyond that, you can customize your invoice to give it a look that matches your company.
- Upload your logo on the top-left corner by selecting an image file from your computer.
- Change the colours under “Header Colour”
Need to add a section or delete one to your ? It is easy. Just use the and icons to remove or add a section and customize your invoice.
All done? Do not forget to download it as a PDF for your records. For your privacy, HelloSafe does not save your invoices to its server, so be sure to keep a copy. If you think you could need to make changes to your invoice later on you can save it to your computer as a .safeinvoice file. Just upload back to this page to keep working on it.
What taxes must be included on my invoice?
Sellers usually are required to include the GST on their invoices. GST stands for goods and services tax. This is Canada’s federal version of a VAT. This value-added tax is set at 5%.
Additionally, most provinces add a provincial sales tax on top of the GST. This is referred to as HST, or harmonized sales tax, when it is combined with the GST. British Columbia and Saskatchewan separately apply a PST or provincial sale tax. In Manitoba and Quebec, it exists too but is referred to as RST, retail sales tax, and QST, Quebec Sales Tax, respectively.
The chart below gives the name of the sales tax and their rates for each province and territory:
|Province or Territory||Type(s)||PST/QST/RST||GST||HST||Total Tax Rate|
|British Columbia||GST + PST||7%||5%||12%|
|Manitoba||GST + RST||7%||5%||12%|
|Newfoundland and Labrador||HST||15%||15%|
|Prince Edward Island||HST||15%||15%|
|Quebec||GST + QST||9.975%||5%||14.975%|
|Saskatchewan||GST + PST||6%||5%||11%|
Sales tax in Canada is a complicated subject. Learn about how the requirements differ between provinces and where to register for GST/HST, PST, RST or QST in our sales tax calculator and guide.
How can I create an invoice for freelance work?
Creating an invoice as a freelancer or self-employed worker is the same as it is for a larger company.
The biggest difference when creating an invoice is that small entrepreneurs may be exempt from registering for GST/HST when getting started. Freelancers must register for, and begin collecting, GST/HST once they reach $30,000 in sales per quarter.
!info block. When applying sales tax to an invoice, remember that the additional 5% to 15% belongs to the provincial and/or federal government. Is it not yours to spend. You are merely collecting it on behalf of the government and must remit it.
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Invoices vs receipts: what is the difference?
Invoices and receipts are similar documents that serve to record a sale. There are a few key differences:
- Issued before a sale
- Records a request for payment
- Used to track sales
- Indicates amount due and payment terms
- Issued after a sale
- Records a payment that has been made
- Used to track purchases
- Includes payment method
- Include amount paid
What is a pro forma invoice?
A pro forma invoice, despite the name, is not considered an invoice for accounting purposes. It is, instead, a document sent to potential buyers to describe a sale before it happens. Pro forma invoices are often used as part of the buyer’s internal purchase approval process. It allows terms to be agreed upon between the buyer and seller before going through final internal approval.
Pro forma invoices may give precise sales prices and include a time limit for the buyer to complete the purchase. Once that date has passed, the seller could change the terms or require the buyer to request a new pro forma.
What about a sales invoice? The term sales invoice refers to a receipt. It is the same thing, a record of a payment for a transaction.
What is a commercial invoice?
A commercial invoice is an invoice used for international transactions. This customs document is created by the exporter and accompanies goods across borders. The declared value of the contents of a shipment is used to calculate tariffs. An example of a tariff would be the VAT (value-added tax) applied to goods entering the European Union from a Canadian exporter.