Canada business supply chain globalization has created a money-making bonanza for the Canada Government as imports enter the Canada triggering payments to the Canada for import tariffs and duties.
san importer, you need to know how much taxes and duties you will be paying on your imported goods before you can start selling them in Canada. There are potentially a variety of taxes that apply to imported goods. These include the Goods and Services Tax (GST), Harmonized Sales Tax (HST), and Provincial Sales Tax (PST).
It can be difficult to comprehend the difference between GST, HST, and PST in Canada. These taxes are important to understand since they can influence the prices you charge on your products and affect your overall business planning. So, here’s a bit of a primer on what you should know about GST/HST/PST and what taxes you’re likely to pay when you import goods into Canada.
What is PST, GST, and HST?
PST (Provincial Sales Tax)
PST stands for Provincial Sales Tax. As the name suggests, it’s a tax levied by the province. Therefore, PST rates vary from region to region, as each province decides the amount of this Canadian tax.
If you are in Vancouver or Whistler , for example, you will be subject to the tax rules of the province of British Columbia. But if you are in Quebec , you will follow the rules of that province.
The PST (Potentially Sold Tax) rate is not based on where you live in Canada (temporarily or permanently), but rather on where you receive the product. If you make an online purchase while in Vancouver (BC) but want to deliver it to a friend in Montreal (Quebec), the applicable tax rate will be that of the province of Quebec.
By the way, it’s worth mentioning that the PST tax changes its name in Quebec. There it’s called QST.
In some provinces, it is possible to find products and services that are exempt from PST. These typically include basic food items, baby products such as diapers and clothing, feminine hygiene products, as well as books and newspapers.
GST (Goods and Services Tax)
The GST – Goods and Services Tax – is levied nationally and has a fixed rate across all Canadian provinces: 5% of the price tag.
There are some types of products that are exempt from taxation by the Government of Canada, such as basic food items, meats and fish, prescription medications, and medical devices like hearing aids, eyeglasses, contact lenses, and asthma inhalers.
The GST is also exempt for financial services, most educational services, and for children under 14, medical and dental services, and music lessons.
HST (Harmonized Sales Tax)
Some regions have chosen to combine the PST and GST rates, creating the HST. In practice, this means paying the 5% GST surcharge plus the PST rate, depending on the province. HST pricing is used in New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, and Prince Edward Island.
Understanding Canadian taxes is crucial and deserves close attention, as the price seen on the supermarket shelf or restaurant menu will likely not be the same as what’s charged at the checkout. It’s common for foreigners to be surprised when they arrive, as a hair cream that costs $5 on the tag, for example, might end up costing $5.50 at the checkout.
When should I register for GST/HST?
In general, you should register if:
- Your income exceeds the established annual threshold.
- Your business requires you to collect taxes even if you earn less.
- You want to recover tax credits paid.
Failure to register when required may result in tax adjustments and debts.
Common mistakes with GST, HST, and PST
- Collecting the tax without being registered.
- Not charging it when it is due.
- Mixing sales tax with income tax.
- Use the money collected as personal income.
Remember: the tax you collect is not your money . It is a temporary obligation that you must report.
What happens if I don’t declare or pay these taxes?
Failure to comply with GST/HST/PST may result in:
- Fines and interest.
- Tax audits.
- Accumulated debts.
What is the tax rate in Canada?
| Province | Type | PST | GST | HST | Total Tax Rate |
|---|---|---|---|---|---|
| Alberta | GST | 5% | 5% | ||
| British Columbia | GST + PST | 7% | 5% | 12% | |
| Manitoba | GST + PST | 7% | 5% | 12% | |
| New Brunswick | HST | 15% | 15% | ||
| Newfoundland and Labrador | HST | 15% | 15% | ||
| Northwest Territories | GST | 5% | 5% | ||
| Nova Scotia | HST | 14% | 14% | ||
| Nunavut | GST | 5% | 5% | ||
| Ontario | HST | 13% | 13% | ||
| Prince Edward Island | HST | 15% | 15% | ||
| Quebec | GST + *QST | 9.975% | 5% | 14.975% | |
| Saskatchewan | GST + PST | 6% | 5% | 11% | |
| Yukon | GST | 5% | 5% |
