Accounting for import & export businesses.

Questions worth getting ahead of

• Recovering the GST/HST paid on imported goods
• Self-assessing the provincial part of the HST on commercial imports
• Keeping evidence that goods were exported
• Knowing when services to non-residents are zero-rated
• Handling drop-shipments for a non-resident customer

Import GST/HST starts at the border

According to the CRA, goods you import are subject to the GST or the federal part of the HST, calculated on the Canadian dollar value including duty and excise tax and collected at importation. The owner or importer of record is responsible for paying it, and a registrant that caused the goods to be imported can generally claim an input tax credit. For commercial goods coming into a participating province such as Ontario, the provincial part of the HST is not collected at the border but may have to be self-assessed on line 405 of the return, or on Form GST489 if you are not registered. Our checklist for importing goods covers the steps, so use this page to frame the questions for your accountant.

Zero-rated exports depend on evidence

Goods you supply in Canada and then export can generally be zero-rated, meaning GST/HST at 0%, if you ship them to a destination outside Canada, hand them to a carrier that will, or the purchaser exports them as soon as is reasonable. The CRA says that in an audit you need satisfactory evidence of export. Keep bills of lading, courier records and contracts naming the destination. Zero-rated sales do not remove your input tax credits, so a registrant can still claim tax paid on related costs. Confirm each customer’s situation, because a consumer purchaser is treated differently.

Selling to non-resident buyers

Exporters often deal with buyers outside Canada, and the CRA describes two situations to ask about. A purchaser who is registered for GST/HST can apply for authorization to issue an export certificate to the supplier so the goods are zero-rated. A non-resident purchaser who is not a consumer may be able to apply for a rebate of tax paid on qualifying goods, generally if the goods leave Canada within 60 days of delivery and other conditions are met. Ask each customer which route applies before the invoice is issued, and keep the paperwork that shows the goods left Canada.

Services and rights sold to non-residents

Some services you provide to unregistered non-residents may be zero-rated even when performed in Canada, such as certain advisory or research services, or services delivered electronically. The CRA says that for supplies of intangible property, such as intellectual property or contractual rights, you must verify and keep evidence of the customer’s GST/HST registration status and residency at the time of the sale. Record that evidence on the customer file before you invoice. Zero-rating depends on the type of service and the customer, so ask your accountant to review a sample invoice rather than applying one rule to every client.

Imported services and drop-shipments need a closer look

If you buy services or intangible property from an unregistered non-resident and use them less than 90% in commercial activities, you may have to self-assess GST/HST and report it on your return. Drop-shipments add another layer. When an unregistered non-resident buys goods from you and you deliver them to a third party in Canada, a GST/HST-registered consignee may have to provide a drop-shipment certificate. Taking physical possession of a non-resident’s goods can also create a liability. Bring contracts and delivery instructions for any arrangement like this before the first order ships.

Support to discuss with Sora