Trade Talk Blog A
s an importer, you need to know how much taxes and duties you will be paying on your imported goods before you can start selling them in Canada. There are potentially a variety of taxes that apply to imported goods. These include the Goods and Services Tax (GST), Harmonized Sales Tax (HST), and Provincial Sales Tax (PST). Imported goods may also be subject to Excise Taxes that apply to certain goods such as tobacco, alcohol, and fuel.
It can be difficult to comprehend the difference between GST, HST, and PST in Canada. These taxes are important to understand since they can influence the prices you charge on your products and affect your overall business planning. So, here’s a bit of a primer on what you should know about GST/HST/PST and what taxes you’re likely to pay when you import goods into Canada.
What is GST, PST, and HST?
GST, PST, and HST are essentially consumption taxes that you pay when purchasing an item or service in Canada.
Goods and Services Tax (GST)
GST is a 5% value-added tax levied by the federal government for most goods and services sold or provided in Canada, including imported goods. GST applies to most transactions in Canada, including those that occur across provincial and territorial borders. In addition to the GST, some provinces have a provincial sales tax rate. This is where it gets tricky for importers in Canada because there are different rules for each province/territory.
Provincial Sales Tax (PST)
PST is a tax levied by some provincial governments and imposed on the sale of many goods and some services within these provinces. The rate charged varies from province to province. PST is NOT collected on commercial importations.
Harmonized Sales Tax (HST)
HST combines the GST with PST into a single tax that the federal government collects. Newfoundland and Labrador, Prince Edward Island, New Brunswick, Nova Scotia, Ontario, and British Columbia are the only provinces that have adopted HST right now (at varying rates).
Whether your goods are subject to GST/HST depends on the type of supply. The Canada Revenue Agency (CRA) separates the type of supply into three categories:
1. Taxable goods and services
Are goods and services that you would normally charge the GST/HST on if you were not part of a qualifying small supplier group. So, once your business has more than $30,000 in gross revenue, you must register with the CRA and charge GST/HST on your taxable goods and services.
2. Zero-Rate Supplies
Are goods and services taxable at the rate of 0%. That means that although goods and services are subject to GST/HST (or PST), you do not have to pay any tax on them. An example of zero-rated supplies is basic groceries such as milk, bread, or cereal. You will need to register for GST/HST even if you only make or sell zero-rated supplies.
3. Exempted supplies
Are exceptions in which goods and services aren’t subject to GST or HST, and you generally cannot register for a GST/HST account if you provide only exempt supplies. That means that you do not charge the GST/HST on these supplies of property and services, and you are not entitled to claim ITCs on property and services acquired to provide these supplies. These supplies include childcare services, most financial services, used housing, health and dental care services provided by a dentist or doctor, etc.
Do I need to pay GST on my Canadian imports?
Yes, all goods imported into Canada for sale are subject to the GST at a rate of 5%, except those specifically exempt.
Who is responsible for paying GST on Canadian imports?
As an importer, you are responsible for paying all the necessary import taxes and fees that are associated with your imports.
How do I calculate GST/PST/HST on my imported goods?
The below table summarizes the type of tax and the tax rate for each province in Canada. To calculate your GST/PST/HST, multiply the value of your imported goods with (1 + Total Tax Rate).
*These rates were last updated in May 2022 and are subject to change. Please refer to the CRA’s GST/HST Rates page for the latest figures.
The Canadian government has also created a tax calculator on its website to help you plan your taxes and import costs.
It is important to note that the GST/HST does not cover customs duties and clearance fees. Duties are determined using the Tariff or Excise Act, while fees associated with importing are charged by your service provider or customs broker.
When do I have to register for and start charging the GST/HST?
You must register for GST/HST if you perform a commercial activity in Canada and your sales are over $30,000. Commercial activity means selling goods, providing services, or both. Once registered, you must charge and collect GST/HST on your sales and file returns periodically with the CRA to remit this tax. The frequency of filing is based on how much tax you collect, and the following rules apply when it comes to registering and starting to charge the GST/HST:
- If you do not exceed the $30,000 threshold over four consecutive calendar quarters, you are a small supplier and do not have to register for the GST/HST. According to the CRA, a Small Supplier refers to a person whose revenue (along with the revenue of all persons associated with that person) from worldwide taxable supplies was equal to or less than $30,000 ($50,000 for public service bodies) in a calendar quarter and over the last four consecutive calendar quarters.
- If you exceed the $30,000 threshold in a single calendar quarter, then you are no longer a small supplier and must register for the GST/HST and start charging on the supply that made you exceed $30,000 within the calendar quarter.
- If you exceed the $30,000 threshold over the previous four (or fewer) consecutive calendar quarters (but not in a single calendar quarter), then you are no longer a small supplier at the end of the month following the quarter in which you exceed $30,000, and you must register for the GST/HST.
Once you complete your GST/HST registration, you:
- Can start charging and collecting GST/HST taxes
- Must complete and file a GST/HST return
- Need to remit the tax you collected
- May be eligible to claim Input Tax Credits (ITCs)
Still have questions about GST/HST/PST and it’s applicability to your imports? Contact one of our Trade Experts , book a meeting with us below, to help you streamline your import process.