s a non-resident importing goods into Canada, you may be eligible for an Input Tax Credit (ITC), which would allow you to recover part, or all, of the GST paid on your imported goods. You can apply for an ITC claim yourself by becoming a GST/HST registrant or claim it through a Canadian customer or purchaser that is GST/HST registered. Read on to learn more about recovering GST as a non-resident importer (NRI).
What is GST?
The Goods and Services Tax (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. However, there are some exceptions such as basic groceries, prescriptions, agricultural, and fishing products. A full list of exceptions can be found in Schedule VI and Schedule VII of the Excise Tax Act.
When is an NRI required to register for GST?
A non-resident importer (NRI) is required to register for GST in one of two cases:
- It carries on business in Canada. Carrying on Business is interpreted in the broadest sense of the definition and means activities such as manufacturing, trading, selling, calling, or any activity undertaken for profit on a regular or continual basis.
- It makes sales from a permanent establishment in Canada. A permanent establishment of a person means a person’s fixed place or someone else’s fixed place of business that supplies goods and services in the ordinary course of business, including an office, factory, branch, or any place where natural resources are extracted.
If, as an NRI, you do not meet these criteria, you may voluntarily register for GST. Once registered, you can claim input tax credits (ITCs) to recover GST.
What are Input Tax Credits (ITCs)?
An input tax credit (ITC) is defined by the Canada Revenue Agency (CRA) as a credit that GST/HST registrants can claim to recover the GST/HST paid or payable for property or services they acquired, imported into Canada, or brought into a participating province for use, consumption, or supply in the course of their commercial activities.
As a GST/HST registrant, you can claim these refundable credits for the GST/HST you pay or owe on purchases and expenses for your business to reduce the tax you collect on your sales and services.
If I’m not registered for GST/HST, can I still claim ITC to recover GST?
Yes, if you are an NRI that is not registered for GST, Section 180 of the Excise Tax Act provides an alternate way to claim input tax credits (ITCs). In this case, the Canadian customer, or purchaser in Canada, may claim the GST on your behalf.
However, in order to claim the input tax credit (ITC), the NRI must provide evidence that the GST was paid. Accepted proof is usually a Canada Customs Coding Form (B3) and a sales invoice between the NRI and the Canadian customer.
The Canadian customer can then reimburse the NRI for the GST that was paid at the time of import.
Still have questions about recovering GST and claiming Input Tax Credits? Contact us! Book a meeting with us below, to help navigate you and your Canadian customer through the process.