Importing goods into Canada: GST/HST checklist

Know who the importer is

The first question on any cross-border purchase is who is legally the importer of record, because that person is responsible for the GST/HST on the goods. The CRA says the owner or importer of record pays the tax, and that a GST/HST registrant who caused the goods to be imported can generally claim an input tax credit for it, provided the usual requirements are met.

This matters more than it sounds. If a supplier ships goods to you and you are the importer, the tax and duty bill generally falls on you even when the invoice from the foreign seller shows no Canadian tax. If instead the seller or a broker acts as importer and bills you afterwards, you need to understand what you were charged and why. Agree on this in writing before the order is placed, and keep it with the purchase records.

Understand what is taxed at the border

Goods you import are generally subject to the GST, or the federal part of the HST, unless they are specified as non-taxable importations. The tax is calculated on the Canadian dollar value of the goods including duty and excise tax, and it is collected at the time of importation along with those other amounts. Because tax applies to a value that already includes duty, a duty cost raises the tax too.

The CRA lists several categories of non-taxable imports, such as certain zero-rated goods, goods imported for repair or overhaul and then exported, and low-value shipments of $20 or less sent by mail or courier, with exceptions that include excisable goods. Do not assume your shipment qualifies: the exceptions are narrow and the conditions matter. Ask your customs broker which registrations your business needs for commercial shipments, and ask them or your accountant to confirm the treatment of unusual goods.

Handle the provincial part of the HST

In a participating province such as Ontario, there is a second piece. For commercial goods destined for a participating province, the provincial part of the HST is not payable at the border, but the goods may be subject to self-assessment. Generally the value on which tax is self-assessed is the lesser of the amount paid and the fair market value.

If you are registered for the GST/HST, you report the provincial part on line 405 of your GST/HST return and may be able to claim an input tax credit for it, depending on how much of your use is in commercial activities. If you are not registered and have to self-assess, the CRA points to Form GST489. A common mistake is to claim the border tax as a credit and forget to self-assess the provincial part, which leaves the return incomplete. Another is to treat goods as commercial when they are for personal use by the owner; different rules apply to non-commercial goods.

Claim the credit and keep the paperwork

Registrants recover GST/HST paid on imports as input tax credits on the return, generally for the reporting period in which the purchase was made. The CRA requires that you hold sufficient documentary evidence before you make the claim. For imports, that means keeping the import paperwork and any broker statements together with the supplier’s invoice, and checking that the tax amounts tie to what you recorded. If you cannot match them, find the cause before filing.

Credits not claimed on the correct return can generally be claimed later, but within time limits. For most registrants the limit is four years, and it is shorter in some situations. Do not rely on the late-claim route as a routine; it is a safety net.

Record the tax in a separate account in your books rather than inside the cost of inventory or supplies. Mixed up with the purchase price, it is easy to miss on the return, and your cost figures will be overstated if you are entitled to recover it.

Services and digital purchases from abroad

Goods are only one case. If you buy services or intangible property, such as software licences or a right to use a patent, from a non-resident supplier who is not registered for the GST/HST, you may have to self-assess. Where you use them less than 90% in your commercial activities, you report the tax on line 405 and remit it. If you use them 90% or more in commercial activities, that self-assessment is not required, so keep the usage rationale on file.

Unregistered purchasers report this on Form GST59, due by the end of the month after the month in which the service was paid for or became payable. Review your foreign subscriptions and contractor invoices once a quarter for anything that was billed without Canadian tax.

Questions to settle before your first shipment

Before ordering, decide who will act as importer, whether you will use a customs broker, and who will review the tax on the paperwork. Confirm whether your business is registered for the GST/HST, since that decides whether you recover the tax and how you report the provincial part. Think about cash too: border tax and duty are payable up front, and the credit comes back only when you file, so large imports can put pressure on working capital.

Bring to your accountant a sample import statement, the supplier invoice, your business number details and your last GST/HST return. If you also sell outside Canada, your questions on exports are different and are best handled separately.