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Saving on Duties and Taxes When You Import

To those who are not familiar, duties can be somewhat of a mystery and seem extremely arbitrary. Why on earth are you paying extra fees on something you already paid for, just because it came from another country? 

Paying duty on shipped items may sting, but there is in fact good reason for those extra fees. Duty is put in place to protect Canadian industry, and is a protectionist approach to balancing trade with domestic industry. Duty rates may vary greatly from one product to another, depending on if and how the product in question is manufactured in Canada.

While they may be useful tools for the government, excessive duties and taxes can eat into your profits and make shopping over the border prohibitive. Luckily, as expert customs brokers, we’re familiar with the little ways you can save money on duty and taxes at the border. 

Duties and Taxes in Canada

You will have to pay duties and taxes on any shipped import into Canada worth more than $20 — $60 if it was a gift. This is called the de minimis level, and it will raise to $150 for items bought online once the Canada-United States-Mexico Agreement is ratified.

As a general rule of thumb, import taxation is 5% across the board. This tax must be paid at time of import. If you’re importing into a province with HST as a commercial importer, you are not subject to provincial tax and can claim your GST through input tax credits. Some items are specified as non-taxable imports, but the vast majority are not. 

If the goods you plan to import are for personal use, you will be subject to provincial taxation as well as federal, and have no recourse to take for claiming taxes paid.

How to Pay Duties and Taxes

Canada Border Services Agency (CBSA) collects duties and taxes on behalf of the Canadian Government. In most cases, duties and taxes are paid directly to the broker (that’s us!) who then forwards duties to the CBSA and taxes at the end of each month on their K84. Working with a broker like Clearit simplifies the payment process for you, the importer. 

CBSA accepts the following forms of payment:

  • Visa, American Express, MasterCard
  • Debit Card
  • Personal cheque (if the amount owing is less than $2,500.00) accepts the following forms of payment:

  • Visa, Mastercard (all payments processed via secure online processing)
  • Debit Card (all payments processed via secure online processing)

Saving Money on Duties and Taxes

Check your personal exemptions. As you are probably aware, Canadian citizens are eligible for personal exemptions when returning to Canada. This means you may bring goods of a particular value into Canada without paying the usual duty and tax. While you have no exemptions for staying outside of the country for under 24 hours, after 24 hours you gain a personal exemption of $200, though you will still need to pay duty and taxes if you go over your exemption. After 48 hours, this exemption increases to $800, and the next $300 worth of goods is taxed at a low duty rate. 

Import in bulk. You’ll save on freight costs the more you import at once — and, of course, the pride per unit goes down the more you order. If you’re importing commercially, it makes far more sense to import more at once than import multiple smaller lots. Not only will you save money on your freight and bulk costs, you also cut down on the potential for extra inspections and extra costly duties by accepting one slightly higher duty fee instead of two or more middling ones.

Import from a nation with a free trade deal with Canada. You’ll receive better duty rates, even possibly as low as completely duty-free. You’ll still need to pay taxes to the Canadian government, but you’ll save on costly extra duty fees from countries without trade deals. 

Apply for a refund or a deferral. If you’re importing supplies for a government contract, you can apply for tax relief or duty drawbacks. Other importers have options to defer their duty fees to pay later (or not at all, if you’re planning on re-exporting the goods). Talk to an expert Clearit agent if you’d like some help deferring or recovering your duty costs!