Canadian VAT is a consumption tax because it is borne by the final consumer. It is not intended to be a cost for most businesses. Canadian VAT is charged at each stage in the production and distribution chain, unlike US-style sales taxes that apply only on retail sales, including on retail sales to other businesses. Canadian VAT payable on inputs is recoverable by businesses through the chain as an input tax credit which can be applied against the VAT collectible on the sales. Therefore, like for European VAT, Canadian VAT is neutral throughout the chain. There are no “cascading” taxes embedded in the goods or services sold to the ultimate consumer in the Canadian VAT regime.
Source: crowe.com
