GST/HST on imports and exports

In this section:

• Overview of imported goods
• Non-taxable imports
• Importing goods into a participating province
• Recovering the provincial part of the HST
• Self-assessing the provincial part of the HST

Overview of imported goods

Goods you import into Canada are subject to the GST or the federal part of the HST, except for items specified as non-taxable importations. The GST or the federal part of the HST is calculated on the Canadian dollar value of the goods, including duty and excise tax. It is collected at the time of importation at the same time as the duty and excise tax. For information on the provincial part of the HST on goods you import, see Importing goods into a participating province.

The owner or importer of record is responsible for paying the GST/HST on imported goods. If you are registered for the GST/HST and you are the importer (the person who caused the goods to be imported into Canada), you can claim an input tax credit (ITC) for the tax you paid on the imported goods, as long as you meet the requirement for claiming ITCs. For more information on ITCs, see Input tax credits.

Non-taxable imports

The GST/HST does not apply to items specified as non-taxable importations.

Importing goods into a participating province

When a resident of a participating province imports a non-commercial good, in addition to the federal part of the HST, in most cases, the provincial part of the HST applies at the border, regardless of the point of entry into Canada or customs clearance.

Exceptions are motor vehicles that must be registered in a participating province and mobile homes or floating homes that an individual used or occupied in Canada.

Recovering the provincial part of the HST

You may be eligible to recover the provincial part of the HST on goods you imported for use in a non-participating province or a participating province with a lower HST rate. For more information, see Reason code 12 – Goods imported at a place in a non-participating province, or imported at a place in a participating province with a lower HST rate (section 261.2) and Guide RC4033, General Application for GST/HST Rebates. Legislative references are to the Excise Tax Act, unless otherwise stated.

Although the provincial part of the HST is not payable when you import commercial goods that are destined for a participating province, the goods may be subject to self-assessment of the provincial part of the HST. Generally, the value on which tax is required to be self-assessed is the lesser of the amount paid for the good and the fair-market value of the property. For more information regarding self-assessment requirements and exceptions, see GST/HST Notice 266, Draft GST/HST Technical Information Bulletin, Harmonized Sales Tax – Self-assessment of the provincial part of the HST in respect of property and services brought into a participating province.

Self-assessing the provincial part of the HST

If you are registered for the GST/HST, the provincial part of the HST is payable by you when a commercial good is imported into a participating province. Enter this amount on line 405 of your GST/HST return. You may be eligible to claim an ITC for the tax you self-assess on the goods, depending on the percentage of use in your commercial activities. For more information on ITCs, see Input tax credits.

If you are not registered for the GST/HST and have to self-assess the provincial part of the HST, use Form GST489, Return for Self-assessment of the Provincial Part of Harmonized Sales Tax (HST). 

If you buy services (such as architectural services for a building in Canada) or intangible personal property (IPP) (such as the right to use a patent in Canada) from an unregistered non-resident person outside Canada, you have to self-assess the GST or the federal part of the HST if you bought them for use less than 90% in your commercial activities (100% in the case of a financial institution).

If you are a resident of a participating province and buy services or IPP in the above circumstances, you may also have to self-assess the provincial part of the HST if you bought them for use of at least 10% in the participating provinces. Tax is computed at the rate for the provincial part of the HST for each particular participating province on the amount paid, to the extent it is for use in that province.

If you do not use the imported services or IPP at least 90% in your commercial activities, you have to report the GST or the federal part of the HST on line 405 of your GST/HST return and remit the tax to the CRA.

You should calculate the tax based on the amount you were charged for the service or IPP in Canadian dollars. The tax is due in the same reporting period that the service or IPP was paid for or became payable.

If you are not registered for the GST/HST, you still have to pay tax on imported services or IPP. To remit the tax, use Form GST59, GST/HST Return for Imported Taxable Supplies, Qualifying Consideration, and Internal and External Changes. The tax is due by the end of the month after the calendar month that the service or IPP was paid for or became payable.

Exported goods

If goods are supplied in Canada and then exported, there are generally three ways they can be zero-rated (taxed at 0%):

1. If the purchaser takes delivery of the goods in Canada and all of the following conditions are met:

• the goods are not excisable goods, such as beer and tobacco
• the purchaser is not a consumer (a consumer is usually an individual who is buying the goods for their personal use)
• after you deliver the goods, the purchaser exports them as soon as is reasonable
• the purchaser does not buy the goods to consume, use, or supply in Canada before exporting them
• after buying the goods in Canada and before exporting them, the purchaser does not further process, transform, or alter the goods, unless necessary for transport
• in case of an audit, you keep satisfactory evidence that the purchaser exported the goods
• if the property being exported is electricity, crude oil, natural gas, or any good that can be transported by means of a wire, pipeline, or other conduit, and the purchaser is not registered for the GST/HST

2. If the goods are not a continuous transmission commodity that is being transported by means of a wire, pipeline, or other conduit, and the supplier:

• ships the goods to a destination outside Canada that is specified in the contract for carriage of the goods
• transfers possession of the goods to a common carrier or consignee that:
  
  • will ship the property to a destination outside Canada, and
  • is retained by the supplier on the recipient’s behalf or by the recipient’s employer
• sends the goods by mail or courier to an address outside Canada

3. A purchaser who is registered for the GST/HST can apply for authorization to issue an export certificate to the supplier to make the goods zero-rated. For more information, see GST/HST Memorandum 4-5-2, Exports - Tangible Personal Property.

If the goods do not meet the conditions for zero-rating, the supplier has to charge and the purchaser has to pay the GST/HST on taxable supplies.

Exported services

A supplier does not charge the GST/HST on services they perform totally outside Canada or on services that relate to real property situated outside Canada.

If the supplier or purchaser temporarily imports goods to perform a service on them (other than transportation services), the goods are zero-rated. The goods must be brought into Canada only to have the service performed on them, and must be exported as soon as possible. Any parts supplied along with these services are also zero-rated.

Zero-rated services for non-resident persons

Certain services provided to a non-resident person, but not to an individual while the individual is in Canada, that are performed all or partly in Canada may be zero-rated, such as:

• certain advisory, professional, or consulting services
• advisory, consulting, or research services to help a non-resident person establish a residence or business in Canada
• custodial or nominee services for a non-resident person's securities or precious metals
• services of acting as an agent for a non-resident person or services of arranging for, procuring, or soliciting orders for supplies by or to the person when the service relates to a zero-rated property or service, or if the supply to or by the non-resident person is made outside Canada
• services made in Canada and provided to a non-resident person by electronic means (for more information, see GST/HST Technical Bulletin B-090, GST/HST and Electronic Commerce)
• advertising services provided to a non-resident person who is unregistered (not registered for the GST/HST)
• services and parts (for goods or real property) acquired to meet a warranty obligation for an unregistered non-resident person
• training services provided to an unregistered non-resident person (except for individuals) to teach non-resident individuals or to give examinations for courses leading to certificates, diplomas, licences and similar documents; give examinations for classes or licence ratings that attest to the individuals' competence; or to give an exam to practise or perform a trade or vocation
• services provided to an unregistered non-resident person for destroying or discarding goods or for dismantling goods for the purpose of exporting them
• services provided to an unregistered non-resident person for testing or inspecting goods that are either acquired in Canada or brought into Canada for the testing or inspection services; however, this applies only if the goods are to be destroyed or discarded during the service or when it is completed

If you are a GST/HST registrant, you can also claim input tax credits to recover the GST/HST you paid or owe on purchases and expenses related to these zero-rated goods and services. For more information, see Input tax credits.

Exports of intangible personal property

Intangible personal property (IPP) is generally a right rather than a physical object. It includes such things as contractual rights, options, intellectual property, rights in relation to goods that are not in possession, and other rights that are enforceable by the courts.

If you are a GST/HST registrant, you have to charge, and the purchaser has to pay, GST/HST on taxable supplies of IPP unless they are zero-rated or made outside Canada.

A supply of IPP that may not be used in Canada is considered to be made outside Canada, and is therefore not subject to the GST/HST.

In addition, a supply of intellectual property, such as a patent or trademark, and the right to use the intellectual property is zero-rated if the supply is made to an unregistered non-resident.

Most supplies of IPP (other than intellectual property) made to persons who are unregistered non-residents are zero-rated except for the following:

• a supply made to an individual unless the individual is outside Canada when the supply is made
• a supply of IPP that relates to real property in Canada or to tangible personal property that is ordinarily in Canada
• a supply of IPP that relates to a supply of a service that is made in Canada and is not zero-rated as an export, a transportation service, or a financial service
• a supply of IPP that can be used only in Canada
• a supply of making a telecommunications facility that is IPP available for use in providing a telecommunication service

For supplies of IPP to qualify for zero-rating, suppliers must verify and maintain satisfactory evidence of the GST/HST registration status and the residency of their customers at the time the supply is made. In addition, for supplies of IPP other than intellectual property, suppliers must verify and maintain satisfactory evidence of the physical location of their customers at the time the supply is made.

You are an unregistered non-resident who buys radios from a registered supplier. You instruct the supplier to have the radios delivered to a GST/HST-registered inspector. The inspector gives the supplier a drop-shipment certificate. The supplier invoices you for the radios, but does not charge GST/HST. You instruct the inspector to deliver the radios to a registered customer. The customer gives the inspector a drop-shipment certificate. The inspector invoices you for the inspection service but does not charge GST/HST. You invoice the customer, and as an unregistered non-resident, you do not charge GST/HST. The customer reports the GST/HST on their return because they are a registrant.

1. A GST/HST registrant transfers your goods to a carrier or warehouse and tells the carrier or warehouse operator to transfer the goods to a third party. The registrant must obtain a drop-shipment certificate from the third party in order for tax not to apply to the supply of goods and commercial services from the registrant to you.

2. A GST/HST registrant transfers your goods to a warehouse for storage until a third party purchaser is found. The registrant is not required to charge tax on the sale of the goods to you. However, the registrant remains potentially liable for tax on the fair market value of the goods unless, at the time of the transfer of the goods to the third party, the registrant obtains a drop-shipment certificate from the third party.

3. A GST/HST registrant transfers your goods to a warehouse and tells the warehouse operator to release the goods to you. The registrant is regarded as transferring physical possession to you in Canada and the transaction is subject to GST/HST. If you plan to sell the goods to another registrant, and the goods will not leave Canada, you can tell the warehouse to issue a drop-shipment certificate to the registrant. This allows you to not pay tax to the first registrant.

When the certificate is issued, the warehouse operator becomes potentially liable for tax on the fair market value of the goods. However, the operator can avoid this liability by getting a drop-shipment certificate from the third party when the third party takes physical possession of the goods.

If a warehouse operator acts as the importer of record for goods you transfer to the warehouse and claims an input tax credit for the importation of the goods, the CRA considers the warehouse operator to have taken physical possession of the goods.

The warehouse operator has to pay GST/HST to the CRA when physical possession of the goods is transferred to another person on your behalf, unless the warehouse operator obtains a drop-shipment certificate from the other person to whom they transfers physical possession of the goods.

A GST/HST registrant sells goods to you and transfers ownership but does not transfer physical possession of the goods to you. The registrant does not charge GST/HST on the sale if the reason they keep physical possession of the goods is to do either of the following:

• transfer physical possession of the goods to you or a subsequent owner, or to another person designated by you or a subsequent owner
• perform a commercial service on the goods for you or a subsequent owner

The registrant assumes any potential GST/HST liability for the goods when they transfer physical possession of the goods to another person. The registrant is relieved of this liability if they receive a drop-shipment certificate from the third party when physical possession is transferred.

A GST/HST registrant does not charge the tax on the sale of goods or supply of commercial services to an unregistered non-resident if the registrant does any of the following:

• transfers physical possession of the goods to a person in Canada who will export the goods within a reasonable amount of time and the conditions for zero-rated exports are met
• transfers physical possession of the goods to a carrier for export and delivery to a person outside Canada
• transfers physical possession of the goods to a person at a place outside Canada

For more information, go to Exported goods in Guide RC4027, Doing Business in Canada - GST/HST Information for Non-Residents.

Normally, the GST/HST applies when a registrant sells goods in Canada to an unregistered non-resident and then leases back the goods, which remain in Canada.

However, under the drop-shipment rules, no GST/HST is charged. These rules also apply if the unregistered non-resident purchases the goods to lease them to another registrant in Canada. In this situation, the second registrant must issue a drop-shipment certificate to the first registrant. The second registrant has to self-assess tax only if they acquire the goods for use in non-commercial activities.

The drop-shipment rules do not apply to common carriers that take possession of goods for the sole purpose of shipping the goods. In all cases, fees for shipping goods are subject to the GST/HST.

The CRA considers the transfer of the goods to the carrier for transportation and delivery to another person to be a transfer of physical possession of the goods to the person to whom the goods are to be delivered. That person can choose to follow the drop-shipment rules.