Shipping to Canada can be confusing when you’re new to international markets. Not only does each country have their own set of import fees—different taxes, duties, tariffs—they change often depending on shifts in governmental decisions and international relations.
Here is a guide to Canadian import taxes and how they are applied.
What is GST (Goods and Services Tax) and how is it Calculated?
GST is a goods and services tax applied at customs. It is a fee added to goods, products, or services as a sales tax at the point of sale. It is calculated as a percentage of the sale cost of the goods or services. This type of tax generates income for the government.
Is There a Difference Between GST and VAT?
Almost all countries have a VAT which stands for value-added tax. VAT and GST are very similar in terms of their implementation but are applied differently based on the country importing into. Only a few countries have GST as well.
They get used interchangeably when they often shouldn’t. They often have a different rate of taxation, VAT being typically higher than GST. Whereas the rate of VAT in the UK is 20%, the rate of GST in Australia 10%. Canada’s GST is currently 5% which is one of the lowest in the world.
Some goods that are exempt from VAT may not be exempt from GST. It’s important to look up the materials that you may be taxed on in each country, because they will differ.
The US is one of the few countries that does not have VAT or GST which leads to a lot of US companies assuming that other countries are the same. This assumption can lead to costly implications.
Although VAT is a type of tax, it’s an indirect tax, meaning that the government doesn’t collect it directly from customers. Instead, businesses collect the tax themselves before repaying it to the government.
Which Canadian Provinces Collect PST?
PST is the Canadian Provincial Sales Tax. It is applied by some Canadian provinces but not all. The PST rate differs depending on which Province your products are sold in. It is handled through the individual revenue agencies of each province in Canada that collects PST separately.
In Quebec, the provincial sales tax is called the Quebec Sales Tax, or QST.
Here are the 2022 Provincial Sales Tax rates:
- Ontario – none
- British Columbia 7%
- Alberta – none
- Manitoba – 7%
- Saskatchewan 6%
- Quebec – 9.975% (QST)
- Nova Scotia – none
- New Brunswick – none
- Newfoundland and Labrador – none
- Prince Edward Island – none
- Northwest Territories – none
- Nunavut – none
- Yukon – none
Here’s a list of goods that are restricted or prohibited when shipping into Canada.
Applying GST/HST and What is the Difference?
HST stands for Harmonized Sales Tax and is administered and enforced by the CRA (Canada Revenue Agency).
HST is calculated as a combination of GST and PST. On the surface HST appears to be a more simplified way to collect taxes, but depending on the regions you ship to, it can be complex. It’s important to work with a Canadian broker or international shipping expert who can help you manage your tax compliance.
When Should You Start Shipping Internationally to Canada?
Canada is the first country that US businesses should think of when they start looking at international expansion. Not only because Canada is geographically close—sharing a border with the US—our common language, and similar culture and values make it a natural first choice. With a population of 36.5 million and a GDP per capita that is the fifth largest in the world, it offers a large consumer base for American companies.
Many US ecommerce companies who ship into Canada pay some of the above taxes at customs when their products cross the border into a Canadian province.
If you are looking to start shipping into Canada, there are many considerations to make. It’s important to work with a broker or international shipping specialist to ensure you are tax compliant and your products aren’t delayed at the border because of insufficient paperwork.
If you’re in need of international shipping support, reach out to DCL Logistics for a quote. We partner with many international experts to bring our customers global shipping solutions that meet their needs.
The US Sales Tax System
If you are importing goods to the US, you may be curious to know about the US sales tax system. Unlike Canada’s GST, the US does not have a federal sales tax. Instead, the US has state sales taxes. These do not apply to imports, however.When importing into the US, you will be required to pay duties that range from 0% to 37%.
The average duty rate is about 6%. If your country is part of a free trade agreement with the US, you may be exempt from customs duties. Businesses are entitled to duty and tax exemptions for shipments valued at less than $800 (USD) when shipping from Canada to the US.
Tags: International
