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Recent changes have given the opportunity to Alberta manufacturers and retailers. Two new free trade zones (FTZ) have been designated for factories and distribution centers, allowing improvements in cash flow. By avoiding taxes in a few different ways, Edmonton and Calgary manufacturers will be able to improve cash flow. The changes will allow manufacturers to put off paying any taxes on imported inputs before the manufacturing process has started while also allowing deductions on such paid taxes on their federal tax bill.
Comparing Free Trade Zones
However, this is quite the contrast from the system in place in the United States. Manufacturers in U.S. FTZs are allowed to save money by paying duty on all final products as it leaves the zone, not on the inputs. As Canada is a tariff-free zone for many manufacturers, the FTZ users cannot tap similar tax savings here. Still, both manufacturers and retailers can delay 5% taxes on services and goods. The change is particularly beneficial to e-commerce sellers, who rarely get paid until the item has been delivered.
As a long-time manufacturing center with strong ties to energy production, Edmonton is not new to change. However, Calgary has only recently emerged as the retail distribution hub of all Western Canada. Yet, these new zones were constructed to build upon the successes of the first FTZ in Canada, Center Port Canada in Winnipeg. And just like the zone in Winnipeg, the new FTZ’s have “single window” setup options to ensure ease of use for retailers and shippers eager to learn and capitalize on the new designations.
Contrasting Free Trade Zones
Canada and the U.S. may use the same term to refer to these zones, but there are a few big differences between FTZ’s in each country. The main difference is a result of geographic restriction. In the U.S., any business wishing to partake in an FTZ must be located somewhere within the defined area of the zone. In Canada, any business that wants to enjoy the benefits of a certain FTZ – just has to apply to that FTZ.
Canada is late to the game when comparing FTZ usage with the U.S. And there are only three FTZ zones in Canada, while there are 100’s in the U.S. However, the number of companies using the FTZ’s in Canada is also much smaller than the number of companies utilizing FTZ’s in the U.S.