In recent years there has been a growing industry of purchasing vehicles in Canada, and then exporting those vehicles to other countries. The reason for this is because vehicle pricing is different from country-to-country. What costs $50,000 in Canada might retail for $150,000 in another country.
When a vehicle is purchased, GST/HST is added to the cost. If a business is purchasing the vehicle, they are normally entitled to claim the GST/HST they paid as an Input Tax Credit (“ITC”). This ITC is then refunded to them when they file GST/HST returns.
Vehicle Exports and the CRA – Denied ITCs
The CRA occasionally takes the stance that vehicle exporters are not entitled to their ITCs. They claim that these exporters are agents acting on behalf of foreign principals.
This is a very complicated argument, but basically the CRA tries to claim that the vehicle exporters do not run their own business, and they are controlled by the foreign companies that ultimately receive the exported vehicle.
Vehicle Exports and the CRA – How Can I Protect Myself?
First and foremost, vehicle exporters should ensure they have the proper contracts in place. This will help ensure that the CRA does not have the ability to argue they are agents in the first place.
If you don’t have proper contracts in place, give us a call today to learn more.
Vehicle Exports and the CRA – Audit Assistance or Notice of Objection
If the CRA is auditing you or has already audited and denied your ITCs before you were able to get proper contracts, we can still help. We have defended a number of vehicle exporters and we have been successful in getting their ITCs allowed in the notice of objection process.
If you need any help regarding denied ITCs, give us a call today. We’re here to help.
Jeff Kirshen, BA, JD(US), JD(CDN)
Partner & Tax Lawyer
Disclaimer
Each article/blog post is only meant to provide general information. It is posted on a specific date. Laws and rules change. Please know that it may be out of date. It is not meant to provide legal advice, and it does not provide legal advice. It cannot be relied on. Every tax situation is unique, and that may mean situations differ from this article/blog. If you have legal questions, please consult a lawyer.