The Auditor General of Canada has just released its 2019 Spring Report on Taxation of eCommerce. The objective of this audit was to determine whether, the Canada Revenue Agency, the Canada Border Services Agency, and the Department of Finance Canada, with regard to e-commerce, ensured that the tax system was neutral and that the GST/HST tax base was protected.
E-commerce is expanding at a rapid rate and there was a need to review the Canadian sales tax system to ensure that it is keeping pace with e-commerce and adapting to the challenges it presents.
One area that was a main focus was the CLVS program. It is quoted in the document that the importer is responsible for assessing the sales taxes owing, collecting the revenues owed, and remitting the funds collected to the Canada Border Services Agency. One of the main findings to this report was the poor data management of the Courier Low Value Shipment Program.
Recommendations for Importers:
Importers are responsible for the calculation and declaration of the value for duty of imported goods. A “value for duty” must be declared for all goods imported to Canada in accordance with the valuation provisions of the Customs Act. The value for duty is the base figure on which duty is calculated. Even if you do not owe duty, the value for duty of goods must still be established so that any applicable assessment of the goods and services tax, provincial sales tax or harmonized sales tax may be calculated compliantly.
The determination of the value for duty and the selection of a particular valuation method must be based upon “sufficient information”, which supports the importer’s declaration.
Importers must maintain records in support of their for duty declaration for six years in Canada. If the Canada Border Services Agency (CBSA) asks for this information, they must be made available for review.
Canadian Importers cannot afford to miscalculate their customs value or value for duty. Incorrect calculation of the duties and taxes owed on imported goods can result in penalties and additional duty and taxes to be paid.
Canadian companies should exercise particular care with regards to Low Value Shipments. In the 2019 Spring Auditor General Report, the Canada Border Services Agency has received the recommendation to review the Courier Low Value Shipment Program to improve the validation and collection of the GST, the HST, and the PST as soon as possible.
Source: CBSA, Business photo created by IJeab