How does a non-resident company flow-through its goods and services tax (GST) paid on importing goods to its Canadian customers?
When a non-resident company imports goods into Canada, most commercial goods are assessed GST and the non-resident company is required to pay GST, even if the non-resident company is not registered for GST. If the non-resident company is registered for GST, it can claim the GST paid back when it files its GST return. However, if the non-resident company is not registered for GST, it may be able to flow-through the GST paid to its customer.
If a non-resident company imports goods into Canada (which is not registered for GST) and delivers the goods in Canada to a customer who is registered for GST, the customer may be allowed to claim the GST paid by the non-resident company. In order to do this, the non-resident company must give the customer proof that it paid the GST when it brought the goods into Canada. A copy of the Canada Customs Coding Form (Form B3-3) that shows GST was paid is accepted as proof. In addition to the customs form, other documents that may be required:
- the sales invoice; or
- a written agreement between the non-resident company and the customer.
The documents must clearly detail the quantity of goods purchased and that the goods were received by the customer in Canada without being used by the non-resident company. If the non-resident company can obtain the above documents, then the GST paid can be passed along to the customer. This means that the non-resident company will save money by getting the assessed GST back from the customer.
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Canadian and foreign tax laws are complex and have a tendency to change on a frequent basis. As such, the content published above is believed to be accurate as of the date of this post. Before implementing any tax planning, please seek professional advice from a qualified tax professional. EPR Maple Ridge Langley, Chartered Professional Accountants will not accept any liability for any tax ramifications that may result from acting based on the information contained above.