Importing goods into Canada can be a profitable endeavor, but you need to get your import taxes right to ensure compliance with Canadian laws and avoid unexpected costs.
Let's look at some of the basics of import taxes to help you understand what to expect and how to plan for your importing needs.
Import taxes are charges levied by the Canada Border Services Agency (CBSA) on goods entering Canada. These taxes serve several purposes, such as protecting domestic industries, generating government revenue, and regulating trade. Understanding the types of import taxes is the first step in calculating and managing costs.
Duties are tariffs applied to specific goods based on their classification under the Harmonized System (HS) of tariff codes. Each type of product has its own duty rate, which can vary significantly depending on the country of origin.
GST is a federal tax applied to most imported goods, usually at a rate of 5%. It's a crucial part of the overall import cost for many products.
Depending on the province of destination, additional sales taxes may apply. For example, Ontario uses HST, while British Columbia applies PST.
These are levied on specific products, such as alcohol, tobacco, and fuel. Excise taxes are in addition to other duties and taxes.
Import taxes are typically calculated based on the Value for Duty (VFD) of the goods. Understanding how the VFD is determined is essential to accurate cost estimation:
The price paid for the goods, excluding certain post-importation adjustments.
The price charged for moving the goods to the Canadian border.
Any insurance paid to protect the shipment in transit.
Canada’s network of free trade agreements (FTAs) offers significant cost-saving opportunities for importers. Agreements such as the Canada-United States-Mexico Agreement (CUSMA) and the Comprehensive Economic and Trade Agreement (CETA) can reduce or eliminate duties on qualifying goods.
Some important steps to maximize FTA benefits include:
Understanding exemptions can help you avoid paying unnecessary duties or taxes on some items and for certain import scenarios.
Travelers returning to Canada may bring back goods duty- and tax-free, depending on the duration of their trip. Currently, spending 24 hours abroad nets a $200 exemption, while 48 hours or more abroad gets an $800 exemption.
Goods valued under $20 are generally exempt from duties and taxes, though this limit may not apply to specific goods like alcohol and tobacco.
A proactive approach to compliance can save time, money, and frustration. Follow these steps to simplify the process of staying compliant with regulations.
Use the CBSA’s Customs Tariff to determine the correct HS code for your products. Misclassification can result in penalties.
Accurately include all relevant costs to avoid underreporting or disputes.
Assess whether your goods qualify for preferential duty rates under trade agreements.
Use CBSA’s online payment tools to settle charges efficiently and avoid delays.
You may not have the option of completely avoiding import taxes, but you can work to prevent your business from paying more than required. Depending on your imports, you might be able to leverage free trade agreements or regulations designed to reduce what you pay at the border.
Experienced customs brokers stay ahead of your requirements and take proactive steps to ensure your compliance at the border and find available cost savings. Connect with Cole to find out more.