The Non-Resident Importer Program

What Is a Non-Resident Importer – a “NRI”

• A Commercial Importer ( a company) not located in Canada that imports into Canada and is the responsible party for all import related costs

• CBSA developed the Non-Resident Importer concept – specifically to help exporters gain access to Canadian markets

• A NRI is both the ‘exporter’ as well as the ‘importer of record’

Importer of Record

• IOR is defined as an individual or business entity that is responsible for the payment of duties and taxes on imported goods

• IOR is the usual party billed by the CHB for all services related to the import

• IORs name is noted on the customs accounting document

• The IOR can be either a resident or a non-resident (NRI)

Benefits to the Canadian Purchaser

• One price - An ‘all-in’ pricing at the time of purchase

• No stress - Goods received without tracking / managing the import process

• Timely delivery – A&A with NRI control movement – customer trust

• Overall shopping experience – Seamless – a ‘local’ feel

Benefits for the NRI

• Profit management – You control the delivered pricing • Documentation control – how many importers? Brokers? Carriers?

NAFTAs? • Importation accuracy - Consistency • Your sales team can focus on product & price! - Not explaining

importation processes to potential customers

• BEST customer service experiences – Simplified purchase to delivery • Sales reach expanded – access to a greater share of the Canadian market

NRI Responsibility at the Border

• NRI is the ‘Importer of Record’ for customs purposes

• Responsible to pay all import duties & taxes

• Accuracy and availability of required import documents

• Liaises with A&A in advance of shipping for ‘smooth clearance flow’ at FPOA (first point of arrival )

Steps to Take1. Registration with CRA for a Business Number (BN) for ‘import

purposes’ 2. Determine if registration as a business with CRA for taxation is

required or voluntary 3. Review NAFTAs for applicable goods – create ‘one’ blanket

certificate 4. Adjust documentation - to identify IOR as different than purchaser 5. Build your ‘all-in’ cost with A&A’s assistance for Brokerage, Freight

or Warehousing costs 6. Secure customers and export to Canada

TaxesCanada supports three types of taxes - billed at different levels

1. Federal GST – Goods & Services Tax (GST)

2. Provincial Provincial Sales Tax (PST)

3. GST + PST combined as a single tax Harmonized Sales Tax (HST)

What is GST?

GST is a Value Added Tax (VAT) that is charged on a product at each stage of its manufacture or sale

• The consumer or purchaser is the entity who pays the final and highest amount

• GST in Canada is a ‘fixed’ federal tax of 5% regardless of Province of business/residency

• Applies to the supply of most goods and services in Canada • Collected at the border on commercial imports on most goods • Collected at the border on casual imports on most goods

What is PST?

• Provincial tax collected which varies in rate by Province • Four Provinces collect this tax: Manitoba, British Columbia, Quebec

& Saskatchewan • Collected on casual imports of most goods at the border • What does this mean?

Consumer (casual) purchases from residents in these Provinces are charged both taxes separately - the GST and the PST on import

• PST does not apply to commercial importers (businesses) on import

What is HST?• HST is a combined tax – GST + PST as a single ‘harmonized’ tax • Six Provinces collect this tax: Ontario, Prince Edward Island, Nova

Scotia, New Brunswick, Newfoundland and Labrador • GST is the constant at 5% + Provincial Rate (varies) = HST charged

at import • Collected on casual imports for most goods at the border

➢ HST does not apply to businesses on import • What does this mean?

Consumer (casual) purchases from residents in these Provinces are charged as a single ‘Harmonized Tax” on import

Tax payable

• Consumers ultimately pay the tax – yet businesses, as Registrants, are generally the responsible party for collecting and remitting tax to the government - the Canada Revenue Agency (CRA) on most goods

• Commercial Importers – Businesses, are generally responsible for collecting & remitting tax to the CRA as Registrants or to CBSA at time of import on most goods

Tax ExceptionsZero Rated Goods • Basic Groceries • Drugs and Biologicals • Medical and Assistive Devices • Exports from Canada • Certain Agriculture and Fishing goods

Tax Exempt Goods • Replacement goods under warranty • Canadian Goods Returning (CGR) • NRI goods consigned to postal or courier for distribution (magazines)

Registering for GST

‘Registrants’ are those businesses that are required to have a GST/HST Registration Number (or who have voluntarily registered) and for

applicable goods will

✓ Collect the GST/HST on most of their sales – taxable supplies they make in Canada

✓ Pay the GST/HST on purchases made to operate their business ✓ File returns on a regular basis ✓ Claim through an Input Tax Credit (ITC) to recover GST/HST paid or

payable on those purchases they use in their commercial activities ✓ Remit any resulting net tax owing

When Must an NRI Register?

Registration for GST/HST MUST occur if your business:

• Has total worldwide taxable supplies of goods and services exceeding $30,000 in a single calendar quarter OR in four consecutive calendar quarters

• Is deemed to be carrying on business in Canada ➢ Provides taxable, incl. zero-rated, goods or services in Canada

… You can be carrying on business in Canada even if you do not have a permanent establishment in Canada

‘Carrying on Business in Canada’ Consideration Factors

• Place where agents or employees of the non-resident are located • Place of delivery, payment • Place where purchases are made or assets are acquired • Place from which transactions are solicited • Location of bank account, assets or an inventory of goods • Place where business contract are made • Place where the non-resident’s name/business are listed in directory • Location of a branch or office place where the service is performed • Place of manufacture or production ‘Carrying on business’ typically means the business activity in question

is done regularly or continually

Place of Supply

For HST purposes – four General Place of Supply rules are used:

Rule 1: Based on the address obtained for the ‘recipient’ of the service

➢ If obtained address is in a participating province, HST will apply

➢If more than one address, determine the address most closely related to the supply

➢If no home/business address obtained, there is no requirement for address to be obtained, where recipient is located. Use address most closely related to the supply

Place of Supply

Rule 2 – Generally based on where the service is performed if Rule 1 does not determine that the supply is made in a province

➢ If the Canadian element of the service is performed mostly in participating provinces, the supply is considered to be made in particular participating province if the same amount or more of the Canadian element is not performed in another participating province

Place of Supply

Rule 3 – If Rule 2 cannot determine place of supply. This rule states IF performed equally in two or more participating provinces use Rule 3

➢ Considers the service to be supplied in the participating province among the provinces that has the highest rate for the provincial component of the HST

Place of Supply

Rule 4 – If by applying Rule 1 the supply of service is not considered to be made in a province and the Canadian portion of the service is carried out other than primarily (50% or less) in the participating provinces

➢ The supply is considered to be made in a non-participating

province and therefore not subject to HST

Rule exceptions – Customs Brokerage services

Place of Supply Rule Exceptions - CHBs

2 Categories:

Category 1: Customs Brokerage Services Those made in respect of importing goods, of arranging for the release

of goods, or fulfilling of any requirement to account for the goods, report, or provide information or remit any amounts

Category 2: Other Services Not included in the term Customs Brokerage Services, can include the

filing of appeals, adjustments, reviews, drawbacks, rulings, objections, redeterminations, refunds, abatement, remissions or anything related to these services

Place of Supply Rule Exceptions - CHBs

Casual Goods:

Category 1 - Deemed made in a participating province if the provincial component of the HST is imposed on the goods at the time of import

Category 2 - Relies on the ‘Place of Supply’ Rules If the supplier of the service (CHB) has a recipient address of the

supply of the service (the client), and that address is a participating province, HST will apply

Place of Supply Rule Exceptions - CHBs

Commercial Goods:

Category 1 – Considered made in the province in which the goods are situated at the time of release regardless of where the importer or the broker are located

Category 2 – Relies on the ‘Place of Supply’ Rules If the supplier of the service (CHB) has a recipient address of the

supply of the service (the client), and that address is a participating province, HST will apply

Key Questions – Conversation & Document Review

• Commodities being imported • Country of manufacture(s) • Number of entries per month – LVS, HVS & CLVS • Average Duty outlay per month – entry types • Average GST/Tax outlay per month • Average Number of Invoice lines – SKUs/entry –

Available Database? • Port(s) of clearance, mode(s) of transport • Current payment terms • Current customs broker • Disbursements? ie: Transport- average outlay monthly

Red Flags - PayoutsMay include:

• Duty; Tax; SIMA; Excise; Surety Bond • OGD requirements • Freight payments or similar

Red Flags - ConcessionsMay include: • Trade Agreements simplified -> ONE blanket • End Use • Temporary Imports • Consolidations • Database import

We will review your opportunities to save you where it counts

Provincial Tax

• NRI MUST invoice the GST/PST/HST at the time of import on casual goods

• NRI must invoice the GST at the time of import on commercial goods if deemed to be doing business in Canada

Provincial Tax – Casual Goods

CBSA has agreed with provinces to collect Provincial Tax on casual goods – even casual goods imported through the commercial stream

• PST is collected only on goods subject to GST or other federal duties • PST or HST is only collected on taxable goods imported by, or released

to, residents who ordinarily reside, or carry on business, in these provinces

• PST exemptions at the provincial level for certain goods by Quebec, Manitoba, Saskatchewan, BC and the participating HST provinces

• Port of entry, or where customs clearance takes place, has no bearing on the tax status of the goods

Provincial Tax – Casual Goods

• Province of Quebec collects Quebec Sales Tax (QST) –differently administered – QST is applied to the selling price (excluding GST) – GST is then calculated on the same selling price

• Alberta and Territories (Yukon, NW Territories, Nunavut) collect PST – GST at time of import applies

• Imported casual goods, under agreement with provinces, CBSA will collect PST if applicable on GST goods

Provincial Tax Snapshot – Casual Goods

ITCs – Input Tax Credits

ITC is for the GST one pays on legitimate business expenses

• A ‘registrant’ can, in most cases, claim an ITC for GST they have paid on both goods and services used during the course of their commercial operations

• ITC identifies how much GST has been charged or collect and how much GST has been paid or owed to suppliers

• A GST Registrant claims ITCs on their GST/HST return • ITCs returns are filed according to a specified ‘reporting period’

Reporting Periods - ITCFiling is either • Monthly - $6m or more • Quarterly - $1.5 to $6m • Annually - $1.5 or less

Based on the total of • Annual taxable supplies of goods and services made in Canada • Zero-Rated Supplies of goods and services • Annual taxable supplies of all your associates

Amount determined will result in either an • Assigned or Optional reporting period

Filing ITCs

• Mandatory electronic filing for most registrants since July 1, 2010

• 4 filing methods: – GST/HST NETFILE – GST/HST TELEFILE – GST/HST EDI filing and remitting – GST/HST Internet File Transfer (GIFT)

• CRA has a Q&A link which will help determine filing requirement • If there is nothing to report, tax returns must be filed timely

ITC Processing

• CRA will Assess or Reassess the processed return

• Contact CRA first – may vacate or confirm assessment or reassess decision

• Formal objection process is available

• Formal subsequent appeal process available

ReviewOutcomes ensure:

✓ Specific needs of the customer are always met

✓ No delays at the border – proper documentation and financial arrangements are in place

✓ Smooth, stress-free, accurate transactions

✓ BEST BROKERAGE Solution!

Builds an accurate history:

• Insight Information for

– Release staff

– Confirming (drafting) staff

– Post review & projection

• Payment methods / timelines • Rulings – CBSA / CRA • Red Flags & Concessions

Email customerservice@aacb.com Phone 1.800.663.4270 Web aacb.com

Contact us for solutions tailored to your needs.