A Non-Resident Importer is a US or foreign based company that imports into Canada under their own name and business number without a permanent presence in Canada.
A fact that is often overlooked by non-resident businesses providing goods and services into Canada is that they are subject to GST/HST taxes on sales into Canada. GST/HST management is responsible for longer delays at border crossings. Another bigger issue is that if GST/HST is not managed before entry into Canada the customer must pay the value added tax. GST/HST can be managed by becoming a Non-Resident Importer.
A Non-Resident Importer could see the following benefits:
- Sell within Canada using a domestic pricing plan
- Manage landed costs without involvement of a Canadian intermediary
- Make border crossings seamless
- Increase market share in Canada
- The following are some challenges that a foreign based company should consider before choosing this business format:
- Must first obtain a Business Number
- Must have their books and records maintained in Canada
- Must consider whether to register for a Goods and Services Tax (GST) number from the Government of Canada
- Must consider registering for Provincial Sales Tax (PST) or Harmonized Sales Tax (HST) where applicable
- Must review transfer-pricing policies
- Must understand input tax credit and flow through of pricing *Note that a non-resident person is not necessarily considered to be carrying on business in Canada for income tax purposes because the entity is considered to be carrying on business in Canada for GST/HST purposes. More GST/HST info: https://www.cra-arc.gc.ca/tx/bsnss/tpcs/gst-tps/frmspbs/menu-eng.html
Meeting the Challenges of Becoming a Non-Resident Importer
Register for a business number, or add an import/export account to an existing business number by:
- Calling the CRA at 1-800-959-5525
- Registering on-line at https://www.businessregistration.gc.ca
- Completing Form RC1, Request for a Business Number (BN). Send the completed form to your nearest Canadian tax services office. Depending on the size of your business in Canada maintaining books and records in Canada is not a big consideration unless you have in-house book keeping or accounting departments. Even in that case their knowledge of Canadian tax laws is likely such that outsourcing to a Canadian firm is a good idea.Obtaining a GST number is fairly straight forward once you have registered for a business number you can use these Applications for non-residents to get a GST number when you have that in many Provinces GST and Provincial sales tax is one harmonized tax called HST. Your Canadian accountant or book keeper should know if tax is harmonized in your business jurisdiction. Input tax credits are credits you get for purchases of goods and services for the business that are subject to GST/HST taxes. Consider that if you are purchasing any goods or services to provide and distribute your product or service in Canada than you are likely paying these taxes at the point of sale.
It may seem like a lot of hoops to jump through, however, becoming a Non-resident Importer is well worth a few hours of your time. For online ecommerce businesses it can provide you with the ability to gain a Canadian presence. Removing the border hassles makes Google’s Canadian Index a very interesting market for US and some foreign online retailers.