September 5th, 2023
We are going to see the correlation that can be made between the imports made by your organization and the information found in accounts payable.
This will namely help to validate that all available ITCs have been claimed, but also, if needed, will reduce the risks related to these imports.
The steps to analyze the situation are as follows:
- We need to group the transactions for which GST has been recorded at $0 in the payables.
- Information on imports must be collected. To facilitate this, you can request a report from the Canada Border Services Agency.
- You will need to find a match for each transaction between the import report and the payables.
First example: Supplier ABC charged $100,000 on invoice 12345. On the import report, we find the same expense for the same supplier. This indicates that GST was collected on the import.
Second example: Supplier XYZ charged $1.4M without GST on invoice 54321. When analyzing the import report for this same transaction, the amount is more like $1M. GST was collected on this transaction. The $400K difference may indicate, among other things, that:
- The supplier may have charged for various services and/or intangibles. Depending on the nature of the latter and the type of activities carried out by your organization, there may be tax consequences.
Consequently, we know that $1M of tangible goods passed through customs and that the GST was normally collected by the Canada Border Services Agency.
Therefore, for the rest of the analysis, we need to check all the supplier invoices and eliminate the expense items that match the data in the import report to isolate the expenses that make up the $400K.
In the vast majority of cases, these costs will come from several sources, installation costs, supervision, insurance, start-up costs, guarantees, etc.
Thus, in our example, after analyzing the situation, your organization may have to self-assess for GST on these expenses depending on the type of activities in which the goods and services were consumed or used. It would also be important to check whether a non-resident withholding tax should apply to the transaction.
So, when dealing with foreign suppliers, you need to keep these risk elements in mind.
If you have any further questions, please do not hesitate to contact us!
