f you are importing gift cards into Canada, you might be wondering whether you need to declare them to CBSA or not and if you will need to pay duties and taxes on them. This article will answer these questions and help you understand how duties on gift cards are assessed.
A lot of people prefer to purchase gift cards and give them to their family or friends on birthdays, holidays, and special occasions. Similar to gift certificates, gift cards are popular because they allow the receiver to choose and purchase exactly what they are looking for. They also cost less to mail than gift packages.
Gift cards are a type of prepaid debit cards that can be exchanged with goods and services at a future date. They are issued by credit card companies, banks, or retailers as a cash substitute.
Do I need to declare gift cards to CBSA?
Gift cards and gift certificates that are imported into Canada need to be declared to CBSA. This is because they are a tangible substitute for currency in a future sales transaction.
As a general rule, goods being imported for any commercial, industrial, occupational, institutional, organizational, or other like use are considered to be commercial importations. This applies to gift cards and certificates.
Are gift cards subject to duties?
Canada’s Customs Act states that all goods imported into Canada, including gift cards or gift certificates, are subject to duties and taxes (including the GST/HST). The only exception is if there is a provision in legislation or regulation that relieves or remits the requirement to pay duties.
How are duties on gift cards assessed?
According to CBSA’s Memorandum D13-11-3, “the value for duty of certain financial instruments, such as gift certificates, airline tickets, bank notes and stock or share certificates, is limited to the value of the physical medium as well as the associated manufacturing costs”.
However, the duty value on gift cards and certificates is negligible because the cards will be used in exchange of goods or services at a later date. That is why the residual method value (Section 53 of the Customs Act) is applied on imported gift cards.
Once the gift card is redeemed, GST/HST will be imposed (if applicable) based on the consideration paid for the supply of the goods and services.
Let us look at an example to demonstrate how gift card values are assessed by CBSA.
You purchase gift cards worth $5000 from a foreign vendor and import them into Canada. Because gift cards serve as a tangible substitute for currency, CBSA will consider their value based on their price plus any manufacturing and printing costs. CBSA will then assess duties and taxes once a gift card is redeemed to pay for goods imported into Canada (based on their selling price).