Is Tax-Free EU Shopping Actually Tax-Free for Canadians?
To better attract tourism, the European Union (EU) offers VAT-free shopping for non-EU citizens. VAT is what Europeans call our GST/HST and means value added tax. This amount is included in the price rather than added on top like the GST/HST. Upon departure from the EU, tourists can present customs with a VAT refund form that can either be processed immediately at the airport or can be mailed back to the stores where the purchases were made. Tourists will then be retroactively refunded for the VAT applied to their EU purchases. It is therefore no surprise that VAT-free shopping has made the EU an attractive destination for big-ticket luxury items. But are these purchases truly tax-free?
In short, it depends. The Canadian Government requires the payment of GST/HST on certain imported goods or services. Whether and how such taxes apply can depend on several factors including, the specific good or service, if you are a resident or non-resident of Canada, your home province, and whether you are registered for the GST/HST. Some goods are considered non-taxable, a detailed list of which can be found here.
Personal Exemption
For non-commercial goods, the Canadian Government offers a personal exemption, which allows Canadians to bring goods up to a certain value into the country without paying regular duty and taxes. In order to qualify for the personal exemption, you must be one of the following: (1) a Canadian resident returning from a trip outside Canada; (2) a former resident of Canada returning to live in Canada; or (3) a temporary resident of Canada returning from a trip outside Canada.
The value of goods that you can claim for the personal exemption will depend on the duration of your time outside of Canada.
| More than 24 hours | Can claim goods up to CAN$200 |
| More than 48 hours | Can claim goods up to CAN$800 |
| More than 7 days | Can claim goods up to CAN$800 |
If the value of the goods being imported exceeds the dollar amount allowed per time abroad, you are responsible for taxes on the amount that exceeds the approved amount. For example, if you were away for a week and the goods purchased amounted to $1000, you would pay taxes on the $200 that exceeds the approved $800. There are also a variety of goods that cannot be imported into Canada so make sure to consult the Canada Border Services Agency website before bringing any items across the Canadian border.
How Much Will I Pay?
For goods that are subject to taxes, the amount of taxes to be paid will vary from province to province. Every Canadian is subject to the GST or federal part of the HST at the border (for goods that do not fall under the personal exemption). The GST or the federal part of the HST is calculated on the Canadian dollar value of the goods, including duty and excise tax. It is collected at the time of importation at the same time as the duty and excise tax.
Participating provinces, meaning those that participate in the HST, will likely apply the provincial part of the HST to its residents at the border, regardless of the point of entry into Canada or customs clearance. “Participating provinces” refer to the provinces that have harmonized their provincial sales taxes with the GST to implement the harmonized sales tax (HST). These include New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, and Prince Edward Island (with some exceptions, see here).
In sum, VAT-free purchases that fall within the designated personal exemption amounts will likely be tax-free. However, any amount that exceeds the personal exemption will be subject to taxes. These taxes will include the GST or federal portion of the HST and may include the provincial portion of the HST if you are a resident of a participating province. If you have any questions or need assistance, give us a call today!
**Disclaimer
This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions you should consult a lawyer.
Samantha Jennings