Non-Resident GST/HST Rebate – Introduction
The export of commercial goods is widely accepted as desirable for every country’s balance of trade and Canada is no different in that regard. For that reason, the Excise Tax Act, which establishes GST/HST, contains various mechanisms to encourage the flow of commercial goods out of Canada if certain conditions are met. One such mechanism is the allowance of a complete tax rebate (refund) of GST/HST paid on goods purchased in Canada by a non-resident for the purpose of exporting the goods outside Canada for commercial purposes. Our Canadian tax lawyers are experts on the Excise Tax Act and can help non-resident businesses obtain all available rebates of GST/HST to which they are entitled.
GST/HST Export Tax Rebate – Conditions of Application
Subsection 252(1) of the Excise Tax Act states that where a non-resident of Canada is the recipient of a taxable supply of tangible personal property and the property was acquired by the non-resident for commercial use primarily outside Canada, the non-resident may be entitled to a complete rebate of GST/HST paid by the non-resident if the non-resident exports the purchased property within 60 days of purchase. In English this means that a full rebate of GST/HST may be payable to a non-resident of Canada who purchases and pays GST/HST on physical (moveable) property in Canada and then exports that property to another country for use or sale in the course of the non-resident’s business operations. The entitlement to the tax rebate is subject to several conditions, which are as follows:
- The non-resident purchaser is not the consumer of the exported property;
- The non-resident purchaser did not purchase the goods for use in the course of the commercial activities of its permanent establishment in Canada;
- The exported property is not excisable goods, which include beer, liquor, spirits, wine and tobacco products;
- The exported property is not gasoline, diesel fuel or other motor fuel, other than fuel that is transported in a vehicle designed to deliver such fuel in bulk and which is not for use by the transporting vehicle;
- The purchaser must have been a non-resident of Canada at the time the exported goods were purchased;
- Each receipt shows that the consideration payable for each exported property exceeds CAD $50, excluding GST/HST; and
- The total of all receipts attached to the non-resident’s application for the rebate of GST/HST shows total consideration payable for the exported property was in excess of CAD $200; excluding GST/HST; and
- The non-resident purchaser must file an application for the rebate within one year of the export of the purchased goods.
It is important to note that the definition of “consumer” in the Excise Tax Act specifically excludes individuals or businesses who acquire property for consumption, use or supply in the course of their commercial activities. Therefore, a non-resident business that acquires industrial equipment for use, say, in its non-Canadian factory, will not be considered to be a consumer of the exported good. This underscores the fact that the GST/HST rebate is aimed at property that is purchased and exported by the non-resident for commercial, and not personal, purposes. An individual who enters Canada to purchase and then export classic cars or golf clubs to the United States for their own personal use will not qualify for the tax rebate. If all of the above-noted conditions are met, the non-resident exporter is entitled to a rebate of GST/HST and the Minister of Revenue is required to pay a tax rebate to the non-resident exporter equal to the amount of GST/HST paid on the goods.
Application for Rebate of GST/HST – Evidence
In order to ensure that the non-resident exporter obtains the full rebate of GST/HST to which they are entitled, it is imperative that sufficient documentary evidence is included with the application for the rebate. It goes without saying that the non-resident exporter must provide proof that they were the recipient of the good. In other words, proof of purchase documents(receipts, invoices or bills of sale) should clearly show that the party applying for the rebate was the party who purchased the goods and exported them from Canada. In addition, the proof of purchase documentation should clearly show the amount of GST/HST paid for each exported good. This documentation should not be handwritten and should contain the supplier’s GST/HST CRA business number. Lastly, the application for rebate of GST/HST must include evidence that the non-resident exporter exported the goods from Canada within 60 days of purchase. Practically speaking, proof that the goods were imported into another country subsequent to purchase should be satisfactory evidence that the goods were in fact exported from Canada.
Tax Tip – Rebate of GST/HST
As long as the Canadian dollar is relatively weak compared to foreign currencies, in particular the US dollar, entering Canada to purchase goods for export is a popular strategy for foreign businesses including motor vehicle dealers. However, strategies involving the physical export of goods often operate with slim margins and it is therefore imperative that all available advantages are obtained by foreign businesses to ensure profits are maximized. As long as the listed conditions are satisfied, foreign businesses that purchase goods in Canada, and then export the goods for commercial use, are entitled to a full tax rebate of GST/HST paid on the goods. Our team of Canadian Tax lawyers can advise you on your proposed business structure and provide advice on all documentary evidence required in order to ensure that your business obtains a full tax rebate of GST/HST.