Do you know what to look for when you claim a sales tax refund for exported vehicles from Canada?
The processes and rules vary between provinces, as do the types of taxes charged. During vehicle export it makes a difference where the vehicle was purchased. While all provinces and territories are subject to the same Goods and Services Tax (GST), the Provincial Sales Tax (PST) and possible Harmonized Sales Tax (HST) vary across the country.
Here is a basic breakdown of what these taxes are:
- GST is the “Goods and Services Tax”. This is a value-added tax with a rate of 5% which is charged on most goods and services sold in Canada.
- PST is the “Provincial Sales Tax”. This is a retail sales tax that is levied by the provinces. The tax rate is different for each province.
- HST is the “Harmonized Sales Tax”. Like GST, this value-added tax is levied by the federal government. It is a combination of the GST and the PST.
Some provinces in Canada charge GST and PST separately. However, there are five ‘participating’ provinces (New Brunswick, Nova Scotia, Newfoundland and Labrador, Prince Edward Island, and Ontario) which combine GST & PST into the Harmonized Sales Tax. The HST rate is 15% in all participating provinces except for Ontario, where the rate is 13%.
When it comes to vehicle export, the rules to claim back HST are like those to claim back GST. To claim PST for the export of vehicles however, different rules for each province are applicable which makes it more complicated to claim a refund. Additionally, only GST/HST registrants can claim an Input Tax Credit to recover the GST/HST paid for goods and services and the supplier must also have a valid GST/HST number at the time of purchase.
The place of delivery determines the HST charged and for specified motor vehicles, a special place of delivery rule applies. When vehicles are registered more than 7 days after the delivery date, the tax payable on delivery is the GST or HST at the rate of the province where the supply was made.
When vehicles are exported, the GST/HST paid to acquire those vehicles can be claimed back.
To do so, the applicable regulatory requirements must be met, including providing proof of export. Normally, a copy of the bill of lading or proof of arrival and/or registration at the destination are sufficient. However, CRA may request other documents to support your refund claim.
A new addition to the complexity of taxes is in the province of British Columbia. They have recently passed legislation that makes it much more difficult to claim the PST back. Prior to buying a car for export in that province, it is best to discuss with us how we can avoid that tax all together.
If you have questions about how to claim sales tax in Canada, our team will do our best to answer them for you. It is best to plan prior to the vehicle being paid and allow us to help structure the transaction so you can more reliably get the sales taxes back for the exported car. In most cases, we can structure the transaction, so it is not paid by you in the first place.