As part of the Economic Action Plan 2012, the government of Canada announced that it will phase out the penny (i.e., the one cent coin) from Canada's coinage system. Accordingly, effective 4 February 2013, the Royal Canadian Mint stopped issuing pennies although the cent will remain the smallest unit for pricing goods and services in Canada.
The phaseout of the penny will have no effect on cheque payments and electronic payments, including credit and debit card transactions. However, price-rounding will be required for cash transactions. In this regard, where pennies are not available, the federal government has mandated that cash transactions will need to be rounded to the nearest five-cent increment in a fair and transparent manner. This means that:
- where the total amount ends in 0.01 or 0.02, one would round down to 0.00;
- where the total amount ends in 0.06 or 0.07, one would round down to 0.05;
- where the total amount ends in 0.03 or 0.04, one would round up to 0.05; and
- where the total amount ends in 0.08 or 0.09, one would round up to 0.10.
The rounding would only be used for cash transactions and the calculation would only take place after any applicable duties or taxes, such as after the goods and services tax/harmonised sales tax (GST/HST) have been applied to the total purchase price. Specifically, GST/HST would be calculated on the total amount of consideration payable in the normal manner and the amount payable by the purchaser would be rounded up or down at that point. The phasing out of the penny has no effect on the calculation or reporting of GST/HST.
For example, the amount payable in a cash transaction where no pennies are available would be determined as follows:
Ms. Chan purchases supplies at the local hardware store in Ontario.
100 screws at CAD1.79 each CAD179.00
HST at 13 percent CAD23.27
The amount payable by Ms. Chan is rounded down to CAD202.25. The hardware store would record CAD23.27 as GST/HST collected for GST/HST reporting purposes.
Mr. Smith purchases designer jeans at the local clothing emporium in Alberta.
one pair of designer jeans CAD128.84
GST at 5 percent CAD6.44
The amount payable by Mr. Smith is rounded up to CAD135.30. The clothing emporium would record CAD6.44 as GST/HST collected for GST/HST reporting purposes.
As noted above, there will be no rounding for transactions where payment takes place electronically or by way of cheque. In these cases, the purchaser will pay the amount invoiced. For example, if Ms. Chan pays by credit card, she will pay CAD202.27. If Mr. Smith pays by cheque, he will pay CAD135.28.