Customs basics: import taxes

This week we dig into some taxation fundamentals for importers. 

Generally speaking, most commercial importers will be required to pay GST (goods and service tax) on imported goods. 

However, importers that bring in certain fuel-inefficient vehicles, vehicles with air conditioning, and or petroleum products (fuel) will be subject also to excise tax. 

In addition, surtaxes are sometimes imposed on certain goods, such as steel or aluminum, usually involved in trade disputes or import monitoring programs.

How are taxes calculated?

The taxes can be applied in a number of different ways:

• GST is typically assessed at 5% of the duty paid value
• Excise taxes are usually calculated at a flat rate for vehicles with air conditioning and fuel-inefficient vehicles. Petroleum is calculated as a specific flat rate per litre (quantity)
• Surtaxes are typically assessed as a percentage of the duty paid value

Read more about the rates and calculations for excise tax here. 

When in the import process do importers pay taxes on their goods?

Typically, taxes are paid at the time of import if paying by cash. If an importer has a bond, the last business day of a given month. 

The amount owed is usually calculated at the time of import.

Are there any new import taxes that importers should be aware of? 

Yes, coming in January of 2022, a luxury tax will be assessed on select luxury goods, such as cars, boats, planes for personal use. 

Read more detail on tax amounts based on the value of the luxury item here.  

Are there ways to reduce taxes? 

Yes, but currently only for GST. 

There are provisions under the excise tax act that exempt GST on certain types of goods (produce, farming equipment, fertilizers, commercial fishing equipment, etc) provided the goods meet certain conditions for exemption as outlined in the act.

Importers can apply for specific remission orders for surtax and or GST, provided they can meet certain conditions outlined by CBSA or CRA for exemption.

What common taxation mistakes do importers make?

The most common mistake is importers not doing enough research prior to importing:

• As noted above, luxury items can be assessed a significant amount of money through excise tax. 
• People wanting to import bigger fuel-inefficient vehicles are subject to excise tax and may not realize it. 
• Farmers need to be aware of the minimum engine output requirement of a farm tractor (kW or horsepower) to understand what is GST exempt in Canada Revenue Agency’s view. 

Bottom line? Research, research, research. And call your Broker.

An experienced Customs Broker can make the import taxation clearer. We’ve been in the customs brokerage business for more than half a century. We’re ready to help.

Making you aware. It’s what we do.