Telephone: (613) 954-8585
Facsimile: (613) 990-1233
File: 11645-3-4 (ms)
XXXXX April 12, 1995
Dear XXXXX
This is in response to your facsimile letter of March 20, 1995, regarding your concerns with respect to importations of casual goods which are shipped from the U.S. by non-resident shippers.
As you may be aware, under the Excise Tax Act (ETA) Canada Customs has the administrative responsibility with respect to the imposition of GST on imported goods. Generally, the ETA provisions dealing with tax on imported goods apply the legislative requirements of the Customs Act. With respect to such issues as entitlement to GST rebates and Input Tax Credits (ITCs), the determination of who the importer is under the Customs Act is important.
As your letter seems mainly concerned with casual shippers, we will restrict our comments to importations of casual goods. Typically, in these situations the terms of delivery of the goods are outside Canada. Regardless of whether a non-resident company is registered, GST (under Division II) is not to be charged on goods delivered or made available outside Canada. If the shipments are being cleared as casual importations, the non-resident shipper cannot be considered the importer. Because the goods are casual goods, the Canadian consumer is considered to be the importer and consequently the Canadian customer is the person who is liable to pay the GST at the time of importation. This amount is collected by Canada Customs.
The customs broker would be clearing the goods on behalf of the Canadian customers and therefore, would pay the Division III tax in respect of these goods on behalf of the customers. The shippers would in turn be reimbursing the customs broker for this tax which they had pre-collected from their customers.
Under these circumstances, if the Canadian customer subsequently returns the goods to the non-resident supplier, only the customer would be eligible for a rebate of GST. Section 215.1 of the ETA clearly states that only the person who has paid tax under Division III is entitled to the rebate. For casual goods, the procedure is to apply for the rebate by means of the Customs Informal Adjustment Request (Form B2G), which is administered by Customs.
In addition, in this scenario, it is clear that the non-resident shippers are not entitled to claim ITCs with respect to the Division III tax paid on importation of the goods because it is the consumer who has actually paid the tax. The only ITCs to which the shippers would be entitled would be tax paid in the course of carrying on its commercial activities.
With respect to the issue of registration for the GST, only non-residents who are carrying on business in Canada, and who make taxable supplies in Canada, are required to be registered. Our understanding is that most of these non-resident shippers are not carrying on business in Canada, nor do they make taxable supplies in Canada. However, if, in the ordinary course of carrying on a business outside Canada, the non-resident company regularly solicits orders for the supply of tangible personal property for delivery in Canada, then this non-resident may be eligible to register voluntarily.
In designing the GST, it was recognized that there may be occasions where non-resident persons engaged in commercial activities outside Canada would incur GST on purchases and imports related to their taxable sales or to sales made outside Canada. Persons electing to register on a voluntary basis are generally eligible to claim ITCs for tax paid on inputs that are used in the course of their commercial activity. For example, a non-resident GST registrant may pay GST at time of importation for catalogues they import to solicit orders, GST on advertising they do in Canada and on Canadian postage. If those costs are incurred in the course of their commercial activity, the GST may be recoverable.
In respect to the processing of GST rebate applications relating to the return of imported casual goods, as we have stated above, the approved procedure for application is by means of Customs Form B2G which are processed by Customs Casual Refund Centres. As a service to the public, a very small number of claims for rebate of GST only which are submitted in error on the GST rebate form are processed by the Summerside Tax Centre.
In consultation with the publishing industry, and after consideration of a number of possible options, the Government concluded that the best course of action was to have non-resident publishers and suppliers of periodicals register for purposes of the GST and collect the tax on their sales. What this means is that most foreign publishers and suppliers of books and magazines are required to collect the GST from their Canadian customers at the time a sale is made and then remit the tax to the Government of Canada.
Revenue Canada is constantly striving to improve its processes, to reduce the administrative burden and the cost of compliance. The Department is developing a process that will allow customs brokers, with power of attorney, to act on behalf of individual Canadian importers of casual mail order low value goods, to submit refund claims in electronic format on tape or diskette, showing the duties and taxes to be refunded to each importer. Brokers will have to maintain records to support these claims, for subsequent audit by Revenue Canada. This streamlined process will substantially reduce paper burden and the present cost of processing B2G Informal Adjustment Requests.
Although the refund cheques will still be issued in the name of the individual importers, the cheques will be sent to the broker, who, having the power of attorney, can deposit them in the broker's account, similar to the current practice for commercial shipments. This will permit a one-step refund process, allowing the mail order company to refund the purchase price plus the duties and GST. The automated B2G process may be considered an interim alternative solution. Other solutions may also result from the formal consultations on customs processing of mail order low value imports that will begin soon.
Should you wish to discuss the streamlined B2G process, please contact Fred Light, Director, Postal, Courier and LVS Division at (613) 953-7130.
With regard to possible amendments to the legislation, as you are aware, Revenue Canada administers the legislation but the Department of Finance is responsible for formulating tax policy and proposing changes to the GST legislation. I note that you have also written to the Department of Finance regarding this matter.
Should you have any further questions on this subject, please contact XXXXX , District I&S Manager in the XXXXX Tax Services office at XXXXX
Yours truly,
H. L. Jones
Director
General Applications Division
re: W XXXXX
| c.c.: |
Imports Unit
XXXXX
Mike Matthews
XXXXX
Fred Light, Director,
Postal Courier LVS Division,
5th Floor Connaught,
XXXXX |
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