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Research by Country/Region January 17, 2018  
CANADA: CUSTOMS, TAXES and DOCUMENTATION REQUIREMENTS for IT PRODUCTS and SERVICES IMPORTS

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A. Is this country a member of the Information Technology Agreement?

B. Customs documentation requirements for IT products

C. Software: duties and taxes, updates, licenses, electronically delivered

D. IT services: tax treatment and other regulations

E. Refurbished, used, or repaired computer equipment imports


A. IS THIS COUNTRY A MEMBER OF THE INFORMATION TECHNOLOGY AGREEMENT?
YES
Signatories to the Information Technology Agreement (ITA) have eliminated their import duties on a wide range of information technology products, including software and computer hardware. For more information on the ITA, and exact tariff elimination schedules of signatories, click here.
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B. CUSTOMS DOCUMENTATION REQUIREMENTS FOR IT PRODUCTS

What are the documentation requirements for the physical import of software? For other information technology products?
There are two essential documents required for the physical import of software:
1) a detailed commercial invoice (or Canada Customs Invoice), and
2) the B3 Canada Customs Coding Form.

These documents are required for all goods imports. The B3 is generally completed by the Importer of Record or a customs broker. For details regarding the completion of a B3, see memo D17-1-10 on the Canada Customs & Revenue website: http://www.ccra.gc.ca
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C. SOFTWARE: DUTIES and TAXES, UPDATES, LICENSES, ELECTRONICALLY DELIVERED

DUTIES AND TAXES ON SOFTWARE IMPORTS

Are duties assessed on the intellectual property of the software or on the medium on which is it presented?
NAFTA, which came into force in January 1994, eliminated virtually all Canadian tariffs on US-produced goods. There are no tariffs on U.S. software imported into Canada.
    Are taxes assessed on the intellectual property of the software or on the medium on which is it presented?
    All shipments to Canada are subject to the 7% Goods and Services Tax (GST), which is a multi-stage sales tax. The GST, which is paid by the Importer of Record, is assessed on the total value of the shipment, with no breakdown in cost of the intellectual property versus cost of the medium on which the software is presented.

    Is customized software treated differently than packaged software?
    For the purpose of taxation, customized software is treated the same as pre-packaged software.
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    IMPORTS OF SOFTWARE UPDATES

    What are the customs duties and tax implications for software sold with updates when the full sales price, including cost of updates, is shown on the original commercial invoice? Are duties and taxes paid on that amount? What happens when the updates are sent at a later date? Are duties/taxes applied again? If so, based on what value? How should information presented on the commercial invoice for the original and subsequent shipments to avoid paying duties/taxes more than once on a single sale?
    At the time of the original importation of the software to Canada, the 7 percent GST would be charged on the total sales price, which includes the cost of updates that will be delivered at a later date. As these free updates are imported, the only possible GST charge would occur on the carrier medium (e.g. CDs, manuals). The initial commercial invoice should indicate clearly that the purchase price includes all subsequent software updates.
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    SOFTWARE LICENSES: CUSTOMS CLASSIFICATION, IMPORT DUTIES, TAXES, OTHER

    Are software licenses classified in Harmonized System 4907?
    No, they are classified in 85.24. As the essential element is the software itself, the medium and any documentation (manuals etc.) do not have an impact on classification.

    Are import duties/taxes applied? If so, on what cost/price base are they levied?
    GST would apply to the invoice price of the license(s).

    Are withholding or other additional taxes applied on software licenses? If yes, how?
    Software sales are exempt from withholding taxes in Canada.

    If a U.S. license agreement is included in the packaging or is part of the installation/registration of shrink-wrapped software imported from the United States, would that agreement be binding on consumers in your market? If so, would U.S. or local laws pertain?
    The U.S. license agreement would be binding on consumers in the Canadian market, and Canadian law would apply.
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    SOFTWARE DELIVERED OVER THE INTERNET/ELECTRONICALLY DELIVERED SOFTWARE

    Are taxes applied to software delivered to the end-user over the Internet? If so, on what value?
    Yes, the GST applies to software delivered over the Internet. As the ‘purchase’ is not checked at the border, it is incumbent on the Importer of Record to declare this importation to Canada Customs & Revenue.

    Would the situation be different if this software were instead delivered to a distributor who has a license to produce (replicate) and sell the software?
    No.

    What are the documentation requirements for the electronically delivered import of digitized products (i.e. software, movie downloads) over the Internet or other networks?
    The requirements are the same as for physical importations. The importer should contact the nearest Canada Customs office to declare the importation.

    Must an electronically delivered software import be accompanied by a physical shipment of the same product?
    As far as we can determine, this is not true for Canada.
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    D. IT SERVICES: TAX TREATMENT AND OTHER REGULATIONS

    Are services (i.e. training, set-up, etc) relating to the sale of software taxed? If so, at what rate and based on what value?
    The GST is payable on the total purchase price listed on the commercial invoice. If the cost of training is included in the invoice, then GST would apply. If there is a charge for follow-up service, then GST would apply. Conversely, if there is no charge for service, no GST is payable.

    Are U.S. IT solution providers permitted to send personnel into the country to set up hardware/software-related systems?
    Yes.

    Are special visa, work permits, and/or professional certification by an accredited body required?
    Under NAFTA, American IT personnel are allowed into Canada to perform installation work and follow-up service, though a work permit may be required. Please check with Citizenship & Immigration Canada (http://www.cic.gc.ca) for more information. Tel: (416) 973-4444.
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    E. REFURBISHED, USED, OR REPAIRED COMPUTER EQUIPMENT IMPORTS

    1. REFURBISHED COMPUTER EQUIPMENT
    Is the import of refurbished computer hardware, parts, and accessories (including toner cartridges) permitted?
    Yes, the importation of refurbished computer goods is allowed.

    If so, what are the documentation requirements?
    The documentation requirements are the same as for any goods imported into Canada.

    Is special labeling required?
    No special labeling is required.

    What value should be shown on the invoice?
    The value shown on the invoice is the price paid by the importer.

    How are duties and taxes assessed?
    The duties and taxes are based on the invoice amount (in CDN funds).
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    2. USED COMPUTER EQUIPMENT
    Is the import of used computer hardware, parts, and accessories (including toner cartridges) permitted?
    Answers are the same as for refurbished equipment. See answers in section E.1. above.
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    3. REPAIRED COMPUTER EQUIPMENT
    Are duties and taxes assessed on the re-import of repaired computer equipment?
    If the repair work is completed under warranty (and there is no additional fee for service), no GST is charged. Otherwise, GST applies only to the repair value (parts and labor).

    How should the commercial invoice appear?
    The invoice should state clearly what type of repair work has been done. In field No. 28 (“tariff code”) of the B3 document, the number 9992 should be entered to indicate that the goods are Canadian goods returned after repair or alteration in the United States, Mexico, Israel, or Chile.
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    RESPONSE INFORMATION

    This response was prepared by the U.S. Department of Commerce/Commercial Service in Ottawa in February 2003. For further clarification please contact:
    Stephanie Linton
    Commercial Specialist
    U.S. Embassy, Ottawa
    stephanie.linton@mail.doc.gov
    Tel: 613-688-5406

    Special Notes: The above information is intended to serve only as unofficial guidance. In seeking to obtain government rulings in specific cases, it will often be necessary to refer to special laws, separate regulations and announcements, and case-by-case decisions by the government. Beyond the general guidelines shown above, legal counsel should be retained at an early stage of consummation of a major procurement contract, and before entering into any legal commitments.

    You can also contact Canada Customs and Revenue Agency at Tel: (613) 991-0537, or visit their website: http://www.ccra-adrc.gc.ca. To familiarize yourself the customs requirements, please access the following pathway on the CCRA website: click on English, then customs, business, and finally importing.

    Approved by Bobby for 508 compliancy, you do not need to have this image on your web pages!! This page was last updated on 06/18/2009. This site is operated by the Office of Technology and Electronic Commerce (OTEC) division of the International Trade Administration, U.S. Department of Commerce.

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