Application of Canadian Sales Taxes to Tariffs

GST on Imports

When goods are imported into Canada, the importer of record must pay Goods and Services Tax (GST), which is calculated on the total value of the goods, including any applicable tariffs or customs duties. For example, if the goods are valued at $100 and are subject to a 25% tariff, the GST is calculated on a value of $125.

It is important to carefully review the contractual agreements between the parties involved in the transaction. Although the importer of record (“IOR”) is legally responsible for paying duties to customs, the contract may stipulate that another party ultimately bears these costs. A clear understanding of these contractual obligations helps ensure that the right party assumes the cost.

Provincial Sales Taxes on Imports

The Canada Border Services Agency (CBSA) generally does not collect the provincial portion of the Harmonized Sales Tax (HST) or provincial sales taxes (PST), such as the British Columbia PST, Saskatchewan PST, Manitoba Retail Sales Tax (RST) and Québec Sales Tax (QST), on commercial imports. However, the CBSA may collect the provincial portion of the HST and PST from individuals based on their province of residence, but only on taxable imports valued at over CAN$20.

Self-assessment rules may apply when goods are brought into certain provinces.

GST/HST and PST on Tariffs

If suppliers pass on the cost of tariffs to their customers, they must charge GST/HST and any applicable PST on the total amount, including the tariffs. This applies whether the tariffs are included in the price of the goods or listed as a separate line item.

In all cases, once tariffs have been paid, they become part of the cost of the goods. Consequently, GST/HST and any applicable PST must be charged on the total invoice amount.

GST/HST Registration

To prevent the GST paid on imports from becoming a cost to the business, it is becoming increasingly advantageous to register for GST/HST purposes. Once registered, the business can claim an input tax credit (ITC) to recover the GST paid at the border.