The Excise Tax Act provides that generally, the supply of goods made in Canada is taxable for GST/HST purposes, and it is the responsibility of the supplier to collect the applicable GST/HST on taxable supplies.¹

Some supplies of goods are zero-rated, meaning they are taxed at zero per cent or no tax collected. Supplies of goods are zero-rated when a supplier ships property to a destination outside Canada, or when a purchaser takes possession of goods in Canada but exports the property as soon as is reasonable under the circumstances without consuming or using the goods first.

Documentary requirements for zero-rated goods

At first glance, the general rule appears straightforward. But additional requirements must be met for the above supplies to satisfy the zero-rating provisions. Whether the supplier or the purchaser exports the goods, it is the supplier who must have satisfactory evidence that the goods have indeed been exported.

The Canada Revenue Agency (CRA) considers satisfactory evidence of exportation to be a document (or a set of documents) that enables the entire shipment of goods to be traced from its origin in Canada to the point where it leaves Canada on its way to a foreign destination. The actual document(s) that may be required can vary depending on the nature of the goods and the mode of transportation.

The required documents can include:

• a commercial invoice or contract that identifies the goods and the recipient, matched with the respective shipping or delivery instructions on the purchase order;
• transportation documents, such as a bill of lading way-bill, a consist sheet, a sea waybill, a liner waybill, a freight receipt, or combined or multimodal transport documents;
• a customs broker’s or freight forwarder’s invoice relating to the exported goods;
• import documentation from the country to which the goods are exported;
• in the case of motor vehicles, including boats, ships, and aircraft, registration from the foreign regulatory authority where the vehicles have been licensed; and
• any other evidence (not produced internally by the recipient) satisfactory to the CRA that the goods have been exported.

Where a supplier is the shipper of the goods, it is likely in most cases that the supplier would have the required documentation. However, where the purchaser arranges for the exportation, it may not be as straightforward. In such cases, the export documents would only be available after the goods are no longer in the control of the supplier. 

In the event of an audit, the CRA will ask the supplier for evidence of exportation. If the supplier is unable to provide adequate documentation, the CRA may disagree with the position that the supply was zero-rated and issue an assessment for GST/HST on the supply.

It is the supplier’s responsibility to obtain the required documentation from the purchaser. The supplier is thus dependent on the purchaser to provide documents that will suffice as evidence of exportation. It is important for suppliers and purchasers to co-operate to ensure that the proper documentation is provided.

Alternatively, a supplier can charge GST/HST on an invoice regardless of whether the purchaser claims the goods are being exported. The supplier would then reissue the invoice to remove the tax once the purchaser provides the export documentation. Though effective, this approach has obvious flaws and can strain the business relationship between the supplier and the purchaser.

Your Baker Tilly advisor can help ensure the documentary requirements for zero-rated supplies on exported goods are met.