Accounting system must be established to Identify tax collected on sales and Identify ITCs.
File monthly/quarterly GST returns.
Minimum two year filing requirement.
Application form to CBSA may require security in the form of a bond (NAFTA sales > $100,000
require $5,000 in bond). Subject to audit by Canadian Border Services Agency (CBSA).
If you are a GST registrant and the registration number must appear on your commercial invoice to enable your client to obtain an ITC (income tax credit).
Canada Revenue Agency has a program that can simplify the GST remittance. The program involves the deferral of GST payment on all imports until the last day of the month. See your broker for more details.
Should I not be GST Registered?
You must pay 5% GST on taxable goods at time of import. The Flow through Method of GST recovery must be used by your firm to pass on the GST paid at the border. A Registered Canadian customer can take advantage of the GST paid by you and use it as their Input Tax Credit (ITC).
Commercial Invoice Non-Registrant includes GST in their Selling Price to Canadian customers. A Non-Registrant is not legally allowed to collect GST from their Canadian customer; therefore, GST should be included in the Selling Price as a Cost. GST must not be indicated as a separate line item on the Commercial Invoice. Canada Customs Invoice Non-Registrant declares the same Selling price (GST included) as indicated on their commercial invoice; however, in field 9 of the Canada Customs Invoice, Conditions of Sale, it must state “Selling Price includes GST”.
GST is paid on goods entering Canada at time of import; GST is calculated on the Duty Paid Value of the goods.
Non-Registrant must supply Canadian customer with a copy of their B3 (Canadian Import Entry) to substantiate the GST paid status of the goods purchased.
Should you choose not to register, then a copy of the Canada Customs entry evidencing the amount of GST paid must support your invoice to your client so that they may benefit from the Import Tax Credit (ITC). It is important to ensure that your Canadian customers understand and accept the flow through Method of claiming an Input Tax Credit. It is also important to ensure that the tax you pass on will match the amount paid at the border.
Value for Duty
The calculation of Customs Duty and the Goods and Services Tax (GST) is reliant on the appropriate valuation of the goods imported into Canada, see Canada Customs link. Since the GST and the majority of duty rates are based on the value method of assessment, reporting the correct value is extremely important.
The legislation covering Value for Duty is found in the Customs Act Sections 45 to 55. The Regulations are found in Customs Memorandum D13 that is comprised of more than 40 individual memoranda.
The primary method of valuation is the Transaction Value (TV). This is defined as the Price paid or payable for goods, as adjusted, when sold for export to Canada to a resident in Canada.
When the requirements of Transaction Value cannot be satisfied, one of the five alternative methods of valuations must be applied.
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