The Canadian Government has introduced various international trade programs, many of which make it easier for corporations to enter into trade with Canada. AG Tax professionals have prepared an overview on the three most trade-supportive programs provided in Canada, which may be useful for anyone who currently performs, or plans to carry out, international trade.
Export Distribution Centre Program (EDCP)
The EDCP Program allows qualifying companies to import goods into and/or acquire goods from Canada without paying the Goods and Services Tax/Harmonized Sales Tax (GST/HST) on purchases worth $1,000 or more, provided that these goods are to be exported.
This program may be relevant to companies if:
•The business is registered for GST/HST purposes;
•90% or more of the revenue is generated from exports (no producing or manufacturing);
•90% or more of business operations in a tax year are commercial activities;
•There is no substantial alteration to property of goods; and
•Limited value is added to goods, either 10% or less in non-basic services or 20% or less in total.
Exporters of Processing Services (EOPS) Program
The ESOP Program relieves participants of the obligation to pay GST/HST on the importation of nonresident goods, as long as these goods are imported for processing, distribution, or storage and are subsequently exported. Compared to EDCP, the EOPS program does not impose a minimum amount of export sales for eligibility.
This program may be relevant to companies if:
•The business is registered for GST/HST purposes;
•The business is able to post financial security if needed;
•Goods-in-possession were never transferred to another Canadian business except for storage or transportation;
•Goods are owned by non-related non-resident(s);
•The goods are not consumed or used in Canada; and
•The goods will be exported within four years of accounting for them.
Duty Deferral Program (DDP)
The DDP Program is administered by the Canada Border Services Agency. It enables qualified companies to import goods without paying duty fees as long as they eventually export the goods. This reduces the total cost and provides a competitive advantage to the business. Companies are eligible for duty relief if any of the following requirements are met:
•The company stores goods before releasing them for sale into the Canadian marketplace.
•The company imports goods for the purpose of re-export, without substantially altering them.
•The company uses imported goods in the production of other goods for export.
Application for a trade program can be a very complex process. AG Tax strongly recommends that all export/import business owners consult with a professional tax advisor on the steps required to apply to a trade program, and guidance on how to submit the required paperwork.
AG Tax LLP can help
It is always advisable to consult a corporate tax professional before applying for any tax saving program, especially if the program involves trading goods between two or more countries. Only a tax professional can provide an accurate assessment of the suitability of the particular program for the business.
If you have any tax queries or need assistance with tax planning or filings, please contact AG Tax.
Aylett Grant Tax LLP is a full service accounting firm with a dedicated team of experts, who are highly-qualified and experienced in handling situations related to U.S., Canada and other international tax laws. We can assist with:
•Canadian Personal and corporate tax returns
•Cross Border Taxation and Business Planning
•U.S. Personal and Corporate Taxation
•Disclosure of Foreign Assets and other information filings
Please contact Peter Aylett or Logan Cerelli-Lough, or one of our available tax professionals, at 604-538-8735 to arrange for an appointment to discuss your tax related queries.
AG Tax is pleased to announce the opening of their Edmonton, Alberta, Canada effective January 2014! For inquiries, please contact Jean-Paul Mactal at 604-538-8735.
IRS Circular 230 Disclaimer: Please note that this document is to be considered other written advice. Any tax advice in this document was not intended or written to be used, and cannot be used, for the purpose of avoiding tax penalties that may be imposed on the taxpayer under the Internal Revenue Code or applicable state or local tax law provisions.
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