The tax may be paid in error because certain goods and services sold to nonresidents may qualify as zero-rated exports. Non-resident businesses should carefully review their invoices to determine if they have paid GST/HST and if they may qualify for refunds. Refund claims must generally be filed within two years.
In Canada, most sales of goods and services are GST/HST taxable. However, many goods and services sold to nonresidents may qualify as zero-rated exports, which are still taxable but at zero percent.
Unlike some zero-rated sales, such as basic groceries, exported goods and services do not automatically qualify as zero-rated based simply on what type of goods or services they are. The criteria for zero-rated exports can vary depending on the nature of the supply and a variety of other conditions, including:
- type of purchaser (i.e. business or end-user consumer)
- purchaser’s residency
- terms and conditions of the sale
- GST/HST registration status of the non-resident purchaser
- type of documentary evidence that goods were exported.
Because many conditions have to be met, some suppliers may find it difficult to qualify some sales as zero-rated exports. Suppliers may be assessed for tax they fail to collect, so they may seek some form of certification from the purchaser to attest that the criteria for zero-rating have been satisfied.
However, the supplier’s determination may not always be correct. If a sale qualified as zero-rated and tax was collected, a non-resident may be entitled to a refund of the tax paid in error.
Don’t miss the deadline to claim refunds
A non-resident of Canada who has paid GST/HST on an exported good or service may want to contact the supplier to determine whether one of the zero-rated provisions could have applied. A supplier may be allowed to refund tax it collected in error, subject to conditions that include a two-year deadline. If a supplier chooses not to issue a refund, a non-resident who believes it has paid GST/HST in error may want to file a rebate application directly with the Canada Revenue Agency. The rebate claim must be filed within two years of the day tax was paid.
Other rebates available
Some non-resident businesses that paid GST/HST on some goods and services may qualify for other rebates on tax paid, including:
- goods acquired in Canada and exported by the non-resident business shortly after purchase
- some artistic works produced for export
- goods leased by non-resident exhibitors
- goods and services in respect of a foreign convention
- some installation services.
Non-resident businesses should carefully review these types of transactions to determine whether they qualify for a rebate.
A non-resident business will generally need a detailed review of all its facts and circumstances to determine whether a particular purchase qualifies as a zero-rated export or whether the purchase qualifies for any other rebates.