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Cross Border Challenges and Continental Opportunities

Cross Border Challenges and Continental Opportunities. The Application of Canadian Value-Added Taxes to Cross Border Transactions. Introduction. GST introduced January 1, 1991 Comprehensive tax base National in scope Collection and credit mechanism. Cross Border Considerations. Goals

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Cross Border Challenges and Continental Opportunities

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  1. Cross Border Challenges and Continental Opportunities The Application of Canadian Value-Added Taxes to Cross Border Transactions

  2. Introduction • GST introduced January 1, 1991 • Comprehensive tax base • National in scope • Collection and credit mechanism

  3. Cross Border Considerations • Goals • benefit Canadian exporters • immunize non-residents doing incidental business in Canada • protect Canadian business from unrecoverable tax • maintain integrity of system

  4. GST Basics • Most goods and services taxable • exempt supplies • zero-rated supplies

  5. GST Basics • Tax supplies made in Canada • 7% rate (15% in N.S., N.B. or Nflnd.)

  6. GST Basics • Register suppliers as tax collectors • Permit limited voluntary registration • Allow credits for tax paid if commercial activity • Allow partial rebates to public sector bodies with no commercial activity

  7. GST Basics • Collect tax at border on imported goods • Imported intangibles or services trigger self-assessment

  8. Cross-Border Transactions • Supplies made in, or outside, Canada • Imports into, or exports from, Canada • Transactions between Canadian businesses flowing through a non-resident • Goods temporarily in or out of Canada

  9. Supplies Made in Canada • Goods delivered or made available in Canada • Leased goods first made available in Canada • Intangibles supplied for use in whole or in part in Canada

  10. Supplies Made in Canada • Services performed in whole or in part in Canada • Real property situated in Canada • Telecommunications: • emitted and received in Canada • emitted or received in Canada and the billing location for the telecommunications facility is located in Canada

  11. Supplies Made Outside Canada • If a supply is not made in Canada, no GST will apply • Non-resident override rule

  12. Imported Goods • Taxable on value for customs duties • Payable by importer of record • Potential for double tax if goods supplied by registered non-resident

  13. Imported Goods • Exemptions are available for goods not intended to be taxed

  14. Imported Goods • Relief is available in cases of temporary presence or use

  15. Imported Goods • Rebates of tax are available for goods returned or not as ordered

  16. Imported Services or Intangibles • Services and intangibles acquired outside Canada escape assessment at border • Canadian purchasers must self-assess to equalize playing field for domestic suppliers

  17. Imported Services or Intangibles • Exceptions where: • full ITCs could have been claimed if GST had been payable • the supply relates to activities or assets outside Canada

  18. Exports • Exports of goods and services to non-residents are zero-rated • Specific zero-rating provisions

  19. Exports • General zero-rating of services for non-residents

  20. Exports • Transportation services • Financial services

  21. Exports • Goods exported for processing and return to Canada • Tax levied on value-added and additional duty, if any

  22. Exports • Rebates: • goods exported within 60 days • short-term accommodation • non-resident exhibitors, sponsors and organizers of foreign conventions • installation services

  23. Exports • Export trading houses • Export distribution centres

  24. Exports • Export trading houses • Export distribution centres

  25. Imports by Unregistered Non-residents • Flow-through of taxes paid • to Canadian purchaser • to Canadian service provider

  26. Purchases from Unregistered Non-residents • Drop shipments on behalf of non-residents • Canadian supplier of goods must collect tax from non-resident • Canadian supplier of commercial services must collect tax from non-resident on fee for services and cost of goods

  27. Purchases from Unregistered Non-residents • Drop shipment relief: • flow-through of taxes paid to Canadian supplier • goods distributed free by non-resident

  28. Purchases from Unregistered Non-residents • Drop shipment relief (cont’d) • delivery to registered Canadian consignee • goods subsequently exported

  29. Purchases from Unregistered Non-residents • Drop shipment relief (cont’d): • if goods are not used in commercial activity, self-assessment is required

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