Importer tax services: recover the border GST, capitalize the duty, defend the count

The border charges two things — only one comes back

At importation, CBSA collects 5% GST on the duty-paid value — customs value plus duty — and a registered importer recovers it on the next GST34 as an input tax credit. Duty is different: it is a permanent cost of the goods. The recovery has a condition people miss: only the importer of record — the person who actually imported the goods for use in their commercial activity — can claim the ITC. Arrangements where a foreign supplier or a related company clears the goods in its own name can strand the GST with a party that cannot recover it. Since CBSA's CARM portal took over commercial accounting, your claims should reconcile to your own statements of account there, not to a broker's summary invoice.

Note what is not collected at the border on commercial imports: the provincial part of HST. Ontario buyers of goods for resale simply recover the 5% and move on — no self-assessment applies to inventory acquired for commercial use. Filing frequency is the cash-flow lever here: an importer paying five-figure GST at the border every month but filing annually finances CRA for up to a year. Electing monthly GST34 filing turns border GST around in weeks, which is usually worth the extra bookkeeping cadence.

Landed cost decides your margin and your COGS

For tax, inventory carries its laid-down cost — everything it took to get the goods to your warehouse shelf — and none of it deducts until the goods sell. USD supplier invoices convert at the rate on the transaction date, with gains or losses on settlement recognized when you actually pay.

Software matters here: we set up landed-cost tracking in the inventory system so duty and freight allocate to SKUs automatically, instead of sitting in a freight expense line that flatters gross margin and misstates COGS.

Inventory valuation CRA accepts — and the writedowns it questions

Section 10 of the Income Tax Act gives you two frameworks: value each item at the lower of cost and fair market value, or value the entire inventory at fair market value. Cost flows through FIFO or weighted average — LIFO is not accepted for Canadian tax, whatever US practice suggests. The method must be applied consistently year over year, and the year-end count is the anchor: a distributor whose count discipline is weak has a COGS number CRA can challenge. Cycle counts through the year beat a single heroic December count, because they surface shrink, receiving errors, and mis-picks while the paper trail still exists. Writedowns of slow or obsolete stock are deductible, but they need evidence — aging reports, discontinued-line notices, actual clearance pricing — not a round-number haircut applied at year-end. The same file defends the writedown twice: once for tax, once for the bank covenant that keys off inventory value.

Duty planning is tax planning

Duty you legally avoid never has to flow through COGS, which makes customs work part of the tax file. Duty drawback recovers duty on imported goods you later export; the Duties Relief Program removes it upfront for goods destined to leave Canada. Classification reviews, correct treatment of assists and royalties in customs value, and USMCA origin certification each move the landed-cost number the T2 eventually inherits — and for related-party purchases, the transfer price CRA wants low is the same number CBSA wants high. That tension, with the paperwork on both sides, is the subject of our cross-border tax page for importers and distributors. The domestic returns — T2, GST34, instalments once federal tax passes $3,000 — run through our tax services on fixed fees.

Source: CBSA — Memorandum D7-4-2, Duty Drawback Program.