14 February 2008

Importer of Record versus de facto Importer

The following commentary is from Ernst&Young.

When it comes to claiming input tax credits (ITCs) with respect to GST paid on goods imported into Canada, CRA makes an important distinction between the importer of record and what CRA refers to as the de facto importer. Such a distinction may have a major impact on the application of the rules for claiming ITCs in cases where the importer of the goods is not the actual owner of the goods.

This administrative position taken by CRA, as set out in GST/HST Policy Statement P-125R, Input Tax Credit Entitlement for Tax On Imported Goods, disallows the ITC to the person that has imported the goods into Canada and paid the GST upon importation but that is not, as a general rule, the owner of the goods (i.e., that is not the de facto importer). The following is a short analysis of the application of CRA’s administrative policy regarding the concept of importer of record versus de facto importer.

Subsection 169(1) of the Excise Tax Act (ETA) sets forth the requirements to be met for a person to be eligible to claim an ITC: 

the person must be registered during the reporting period;

the person must acquire or import the goods;

the tax in respect of the importation must be paid or become payable during the reporting period; and

the imported goods are for consumption, use, or supply in the course of the commercial activities of the person.

In addition, as stated in the Department of Finance’s explanatory notes to section 178.8 of the ETA:

New section 178.8 of the Act addresses circumstances in which a person […] is the recipient of a supply made outside Canada of goods that are imported into Canada for that person’s consumption, use or re-supply and that are not supplied by that person outside Canada before their release, but is not the person by or on whose behalf the goods are accounted for under the Customs Act at the time of their entry.

However, for section 178.8 of the ETA to apply, there must also be an agreement entered into by the supplier and the recipient with respect to the goods