GST/HST on exports and non-resident customers

Zero-rating stands or falls on the proof kept at the time of supply. Ask about a specific customer.

GST/HST on sales to non-residents: zero-rated, exempt, or neither

Zero-rated and exempt differ: zero-rating charges no tax and keeps input tax credits; exempt loses them. The third column is what a review asks about, because zero-rating survives on evidence.

Selling outside Canada usually means not charging GST/HST, but the rules still apply. Zero-rating has conditions, and they are almost always about evidence: proving the goods left, or that the customer was an unregistered non-resident.

Zero-rated, not exempt

Same invoice, different return. A zero-rated supply is taxed at zero: you charge nothing and still claim input tax credits. An exempt supply has no tax and no credits. Export relief is almost all zero-rating, so exporters often sit in a refund position. See zero-rated versus exempt supplies.

Exported goods

Where goods are supplied in Canada and then exported, the CRA describes three general routes to zero-rating.

1. You ship them out

It is zero-rated where the supplier ships the goods to a destination outside Canada named in the contract for carriage, hands them to a common carrier or consignee retained to ship them out, or mails or couriers them abroad. Shipping documents are the evidence.

2. The customer collects in Canada and exports

Harder, because the goods sit in Canada in the customer’s hands before leaving. All of the following must hold:

• the goods are not excisable goods such as beer, spirits, wine or tobacco;
• the purchaser is not a consumer — generally, not an individual buying for personal use;
• the purchaser exports the goods as soon after delivery as is reasonable in the circumstances;
• the purchaser does not acquire them to consume, use or supply in Canada before exporting;
• the goods are not further processed, transformed or altered in Canada before export, except to the extent reasonably necessary or incidental to transporting them; and
• the supplier keeps satisfactory evidence, for audit purposes, that the purchaser exported the goods.

3. An export certificate

A purchaser registered for GST/HST can apply for authorization to issue an export certificate to the supplier, which causes the goods to be zero-rated. There is also a separate Export Distribution Centre Program for authorized export-oriented, non-manufacturing businesses.

Exported services

Two easy cases: no GST/HST on services performed totally outside Canada or relating to real property situated outside Canada. Neither is an export rule; they are outside the tax base.

Harder: services performed partly or wholly in Canada for a non-resident. Some are zero-rated unless supplied to an individual in Canada. The CRA’s list includes:

• certain advisory, professional or consulting services;
• advisory, consulting or research services to help a non-resident establish a residence or business in Canada;
• advertising services supplied to a non-resident who is not registered for GST/HST;
• custodial or nominee services for a non-resident’s securities or precious metals;
• services of acting as an agent for a non-resident, or arranging, procuring or soliciting orders, in defined circumstances;
• services supplied to a non-resident by electronic means;
• warranty services and parts supplied to meet a warranty obligation for an unregistered non-resident;
• certain training services supplied to an unregistered non-resident, other than to individuals; and
• services of destroying, discarding, dismantling, testing or inspecting goods in defined circumstances.

Services performed on goods that were temporarily imported solely to have the service performed on them, and that are exported as soon as possible, may also be zero-rated, along with the parts supplied with them. Whether GST for export of services is charged turns on where the service is performed and whether the customer is a non-resident, as set out above.

Intangibles: software, licences and rights

Intangible personal property is generally a right rather than a physical thing — contractual rights, options, intellectual property, licences. The rules follow a different logic:

• A supply of intangible property that may not be used in Canada is considered made outside Canada, so GST/HST does not apply at all.
• A supply of intellectual property, such as a patent or trademark, or the right to use it, is zero-rated if made to an unregistered non-resident.
• Most other intangible property supplied to unregistered non-residents is zero-rated, with exceptions, including supplies to an individual unless that individual is outside Canada when the supply is made, property relating to real property in Canada or to goods ordinarily in Canada, property relating to a non-zero-rated Canadian service, and property usable only in Canada.

The evidence file

For goods, keep bills of lading, carrier and customs documents, courier tracking, and contract terms placing the destination abroad. For intangibles, suppliers must verify and maintain satisfactory evidence of the customer’s registration status and residency at the time the supply is made, plus physical location for non-IP intangibles. Normal record retention rules apply. Zero rated exports hold up only when this evidence is kept at the time of supply, not assembled after the CRA asks.

A non-consumer non-resident purchaser may also claim a rebate of tax paid on qualifying goods exported within 60 days of delivery, among other conditions. If avoidable tax was charged, that rebate may be the customer’s route back.

Domestic sales follow the place-of-supply rules instead. If you sell both ways, especially as an online seller shipping in several directions, map each revenue stream once rather than deciding invoice by invoice.

Whether any of this applies to you turns on your year-end, your structure and what else is in the picture — ask about your own situation and a CPA replies, usually the same business day. Free either way.

The same foreign invoices raise an income-tax question about currency movement — see how FX gains and losses are taxed.

This article is general information, not tax advice for your specific situation. Tax rules and CRA administrative positions change — confirm anything that affects a decision with the CRA or with us first.

Sales tax is only half of the cross-border picture. Paying a non-resident for work performed inside Canada raises an income tax withholding of its own. See Regulation 105 withholding.

Zero-rated sales still go on the return, with the proof of export kept on file; our GST/HST filing work includes checking that the documentation is there before a return claims the rate.