NRI To Canada: All You Need To Know

The Business Number (BN)

When you complete the NRI application process, you will be given a 9 digit Business Number (BN). This is the equivalent of the EIN that companies use in the USA. The Canada Border Service Agency (CBSA) and Canada Revenue Agency (CRA) interact with all businesses through business numbers, and it is a requirement before you can begin importing into Canada. 

The BN provides one number that you will use for identification for various business tasks. These tasks are paying corporate income tax, GST/HST, identification for importing and exporting, and any payroll-related deductions for taxes. 

Obtaining your BN and registering for an import/export account with the CRA is an important first step in the application process for becoming an NRI. You can apply through your customs broker. 

Valuation for Duties

You will have to state the dutiable value of your imported items on the commercial invoice. The dutiable value is usually the transaction value of the item sold. 

The way your NRI will work is as if you have a separate business in Canada, and if you are an Amazon seller, you will import by selling from your US business directly to your Canada business at cost price plus the cost of freight. Therefore, that is the dutiable value that you can state.

However, if you are shipping items on consignment, or otherwise have no buyer at the time of shipping, you will have to determine and state the value another way. There are several methods you can use to provide alternative valuation, when a sale does not yet exist. These methods usually require prior approval in the form of a written ruling from the CBSA (Canada Border Services Agency). These methods are called ‘Identical Goods’, ‘Similar Goods’, ‘Deductive Method’, ‘Computed Method’, and ‘Residual Method’.

If the selling price includes amounts for customs duties, Goods and Services Tax (GST), customs brokerage and freight from the place of direct shipment to Canada, then this needs to be stated on the commercial invoice and/or Canada Customs Invoice. Such amounts are deducted from the selling price when the value for duty is calculated.

HS Tariff Classification

Canada uses the HS, or Harmonized System classification of goods as arranged by the World Customs Organization. It is mandatory in Canada that you have the accurate HS classification to identify your import.

The worldwide HS code comprises six digits, and you will have four further digits which denote Canada-specific tariff requirements. The HS code is organized hierarchically, with broader product categories represented by the first few digits and more specific subcategories represented by additional digits. The HS code covers a wide range of goods, including raw materials, semi-finished products, finished goods, and specialized equipment. It classifies products based on various criteria, including their composition, function, and method of production.

What duties you pay in Canada depends on what the item is, the country of origin and where you, the importer, are from. 

For USA-based NRI holders, the North American Free Trade Agreement (NAFTA) allows you some duty benefits. NAFTA is a treaty between Canada, Mexico, and the United States that was designed to foster greater trade between the three countries. They have eliminated trade barriers, increased investment opportunities, and established procedures for resolution of trade disputes. Under NAFTA, apparel, leather goods and footwear certified as produced in the USA can enter Canada duty-free. Please bear in mind this only applies for products manufactured or significantly modified within these countries. In the case of modification of goods, a customs attorney will need to oversee and sign off on this. GST of 5% still applies.

Preferential tariff treatment, such as duty-free tariffs, is usually only extended if certain direct shipment and proof of origin requirements are satisfied.

Goods and Services Tax (GST) on Imported Goods

The GST is a standard federal tax of 5%. It is applied at the border to all imported goods, so you should expect to be invoiced for this, unless your goods are zero-rated. GST is calculated on the value of the goods, including the value of any customs duties, and is collected by the CBSA on behalf of the CRA. 

As an NRI, you can enroll in the GST program and claim back the 5% GST as ITCs (Input Tax Credits). There is a form to fill in and a fee to pay to enroll in GST. You will have to submit GST and HST returns at regular intervals to claim it back. You will either need an accountant to file monthly or quarterly reports in Canada, or to be on top of this yourself.

Some Canadian provinces also charge a provincial sales tax which they call the Harmonized Sales Tax, or HST, and combine with the GST on arrival to their territory. 

• New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island have HST at a rate of 15%
• Ontario has HST at a rate of 13%
• The province of Quebec applies the Quebec Sales Tax (QST) at a rate of 9.975%, calculated on the sale price of the goods in addition to the 5% GST
• HST is applied at the border to all imported noncommercial goods destined or supplied to the provinces of Ontario, , Newfoundland and Labrador, Nova Scotia, and Prince Edward Island.

As an Amazon seller, your products will be sold to buyers all over Canada. You will be charged for provincial taxes according to where your sales take place. Amazon will keep track of this, and you will receive an individual report based on your sales showing the taxes your customers are charged.

You will have to be registered to pay the GST/HST if your yearly revenues worldwide are greater than CAD$30,000, and you conduct business in Canada. For an NRI, conducting business in Canada refers to if your products get delivered there, if you store inventory there, among various other criteria. Otherwise, if you earn below the threshold, registering is voluntary but recommended. You should still include GST in your selling cost but you will not be able to claim it back. 

For most NRIs that we work with, the following deposit requirement is not necessary. However, if your net annual sales in Canada are over CAD$100,000, and your annual net tax is more than CAD$3,000, you must put down a deposit when registering for GST/HST with the CRA. Initially, this deposit amounts to 50% of your projected net tax over the 12-month period post-registration. In subsequent years, the deposit equals 50% of your actual net tax from the preceding 12-month period. The maximum possible deposit stands at CAD$1 million, while the minimum is CAD$5,000. If you would have a fixed business location in Canada, this would not apply. 

Canadian Customs Clearance

A commercial invoice is required for Canadian customs clearance. For shipments valued CAD $1,600 and over, you will also have to fill out a Canada Customs Invoice. Both invoices should clearly delineate what the imported goods are, the selling price, and what other costs are included – such as customs, duties, GST/HST, customs brokerage, and freight costs into Canada.

Depending on the nature of the goods and their specific import criteria, permits, certificates, licenses, bills of lading, and other documents might be necessary.

Canada has an electronic system wherein you submit documentation in advance to the CBSA. This is the ACI (Advanced Commercial Information) system. The following are the required timelines for when you need to submit the information electronically. 

• By truck: At least one hour before arrival.  
• By rail: At least two hours before arrival. 
• By air: Four hours before arrival in Canada or at departure time of the flight if less than 4 hours
• By ocean: Within prescribed time frames prior to arrival or prior to loading depending on the type and origin of goods.