P-125 "Input Tax Credit Entitlement for Tax on Imported Goods".

Subsection 178.8(2) of the Act reflects the fact that it is the constructive importer's activities for which the imported goods are immediately destined after they have been supplied outside Canada and that it is therefore those activities that should determine entitlement to an ITC for the tax. By deeming the constructive importer to be the sole importer of the goods and the tax on the importation to be paid or payable solely by the constructive importer, the provision ensures that the constructive importer may be entitled to an ITC regardless of whether another person such as the supplier may have effected the physical importation of the goods and accounted for the importation of the goods....

The specified supply of goods may...be deemed made outside Canada where the goods are delivered or made available in Canada to the recipient of the supply, but the supplier is a non-resident person who is not registered and does not carry on business in Canada. However, subsection 178.8(2)...will not apply in this case if the non-resident pays the tax on the importation of goods. Rather, it is the ITC relief mechanism under section 180 of the Act (ITC for imported goods received from a non-registered non-resident)...that may apply in this situation.

The registrant and the supplier may enter into the agreement at any time. If the agreement is entered into after the supply and importation of the goods, the effects of entering into the agreement described above will be retroactive as follows:

• The supplier will become retroactively entitled to an ITC for the tax on the importation of the goods and will be retroactively liable for the collection of tax that became payable on the supply that is deemed to have been made in Canada when the agreement for the supply was originally entered into. If the supplier had claimed an ITC for the tax on the importation of the goods, there will be no penalty and interest consequences if the supplier had also collected the tax on the deemed value of the consideration for the supply when it became payable (as if the supply made at that time had in fact been made in Canada and been subject to tax), accounted for it in its net tax and remitted any resulting net tax remittable when required.
• The constructive importer will no longer be entitled to an ITC that it may have claimed for the tax on the importation of goods. If the constructive importer in this case had claimed an ITC for the tax on the importation of the goods, the limitation period for assessing the net tax of the constructive importer is extended to four years after the day the agreement is entered into to take into account the amount of the ITC claimed.