Tax & Trade Blog

---

TRQ IMPORT ALLOCATION INSPECTIONS

OBTAINING A TRQ IS NOT THE END OF THE STORY!

We have previously written about tariff rate quota (“TRQ”) applications for dairy and poultry here.  While many businesses may view obtaining a TRQ import allocation as the final step of the process, the reality is that it is very much the beginning of the TRQ process.

Both Applicants and Allocation Holders (i.e., persons/organizations issued a TRQ import allocation) remain subject to ongoing importer compliance obligations under the Export and Import Permits Act (“EIPA”), the Import Allocation Regulations (“IAR”) and associated TRQ policies (collectively, the “TRQ Regime”).  As EIPA inspectors have broad inspection powers, failing to adhere to these compliance obligations could lead to significant financial (and other more serious) consequences.  

---

GST 201: CAPITAL PROPERTY

UNDERSTANDING THE FINE LINE BETWEEN CAPITAL & NON-CAPITAL PROPERTY

This is another in our GST 201 Series Reports, written to provide in-depth analysis of key topics under Canada's GST/HST regime.

In this Report, we focus on “capital property”, an overlapping concept under both the ITA and ETA that determines how special input tax credit rules apply to commercial activities.

Determining whether a property is capital is a fact-driven exercise, and even small factual differences can lead to very different results.

---

CBSA LOSES CHALLENGE ON NHP IMPORTS!

CBSA ARGUED CHANGE IN EXPLANATORY NOTES REQUIRED EVIDENCE OF EFFICACY

The recent decision of the Canadian International Trade Tribunal (the “CITT”) in Atrium Innovations Inc. (AP-2021-032 and AP-2022-026) is good news for importers of licensed Natural Health Products (“NHPs”). 

In its decision the CITT upheld 25 years of precedent and rejected arguments by the Canada Border Services Agency (the “CBSA”) that December 2019 changes to the WCO Explanatory Notes now require evidence of efficacy before classifying an NHP as a “medicament” for tariff purposes.

---

FUEL VENDOR REGISTRATIONS IN CANADA

OVERVIEW OF FUEL TAXES & REQUIRED REGISTRATIONS

Canada’s fuel tax and registration landscape involves a patchwork of federal and provincial laws. Depending on the nature of their activities, both resident and non-resident oil and gas companies operating in Canada face many layers of compliance obligations.

This blog provides a high-level overview of the kinds of registrations or licenses that may be required for those selling or distributing fuel in Canada.

---

CHINESE STEEL IMPORTS COSTLY

IMPORTING CHINESE STEEL HAS COSTLY CUSTOMS DIMENSIONS

While the recent focus in Canada has been on the tariff war between Canada and the US (for example, President Trump's tariffs on certain imported Canadian steel, and Prime Minister Carney's retaliatory surtaxes on same), what many have overlooked are similar Canadian surtaxes on Chinese steel and aluminum, which pre-date both.

As a number of Canadian importers have figured out, importing Chinese steel comes at a very significant cost on two different fronts.

---

CUSTOMS RULES & CRIMINAL OFFENCES

IMPORTER BEWARE: CUSTOMS NON-COMPLIANCE CAN BE A CRIMINAL OFFENCE

Earlier this year, Canada Border Services Agency (“CBSA”) intercepted a shipment declared to be electric fans from China.  When opened, CBSA found no fans, but almost 20,000 cartons of cigarettes, with a market value of about $2.2 million. (!)

Everyone knows that smuggling millions in cigarettes into Canada is a crime.  Like importing other sensitive goods (e.g., a prohibited weapon), many forms of importation can amount to criminal conduct, carrying with them potential offences under the Criminal Code.  Not all customs errors or violations amount to criminal conduct, however.  We explore the line between the two below.

---

MANITOBA RST EXTENDED TO CLOUD SERVICES

PROVINCE CONTINUES TREND OF IMPOSING PST ON CLOUD SERVICES

We have previously written about Manitoba’s proposal to extend coverage of its Retail Sales Tax (“RST”) to cloud services here. With the recent enactment of Bill 46 on November 6, 2025, Software as a Service (“SaaS”), Platform as a Service (“PaaS”), and Infrastructure as a Service (“IaaS”), will be subject to Manitoba’s 7% RST starting January 1, 2026.

Manitoba now becomes the latest member of Western Canada to subject cloud services to provincial sales tax (“PST”), joining British Columbia (“BC”) and Saskatchewan (“SK”). 

---

CRA AUDITS PURPOSE-BUILT HOUSING REBATE

CRA REBATE ADMINISTRATION LEADS TO MANY DENIALS

When Prime Minister Justin Trudeau’s Liberal government announced its new 100% GST rebate for tax paid on the construction of qualifying new rental housing in September 2023 (which we blogged on here), the measure – formally called the Enhanced GST New Rental Housing Rebate – was unveiled with considerable fanfare.  In fact, it was touted as a key pillar of Canada’s renewed national housing strategy, and designed to reduce development costs, accelerate construction of much-needed rental units and increase long-term affordability for renters across Canada.

That fanfare has now met the practical reality of tax auditors at CRA charged with reviewing and auditing these Rebate Applications.   In fact, CRA is now actively auditing in this area and rejecting a number of Rebate Applications for failing to meet the very complicated rules that came with the new Rebate process.

---

NEW FOOD LABELLING RULES INCOMING

AMENDMENTS TO FOOD AND DRUG REGULATIONS TAKE EFFECT IN THE NEW YEAR

After nearly four years, amendments to the Food and Drug Regulations (“FDR”) labelling regime, previously enacted in July of 2022, are set to take effect on January 1, 2026.

While the changes are laudable from a public health perspective, parties selling regulated food products (“Regulated Parties”) need to ready themselves for compliance with these changes, and in this report, we provide a brief overview of the key changes.

---

CANADA-AUSTRALIA CUSTOMS PACT SIGNED

AUSTRALIA-CANADA'S LATEST PARTNER IN CUSTOMS MUTUAL ASSISTANCE AGREEMENT

Since 1979, Canada has been putting together a web of Customs Mutual Assistance Agreements (“CMAAs”) with a number of trading partners, including the US, Mexico, UK, EU, Israel, China, Korea, Chile, and Argentina.  Australia recently became the 15^th nation to agree to a CMAA with Canada, and we discuss below how these protocols allow Canada to tighten its enforcement on goods coming into Canada from foreign lands.

---

MAJOR CHANGES TO CUSTOMS LIABILITY!

"IMPORTER OF RECORD" WILL BE JOINTLY LIABLE FOR PAYMENT OF DUTIES AND TAXES

On January 1, 2026, amendments to subsection 17(3) of the Customs Act (“CA”) come into force that make the “importer of record” jointly liable with the owner of the goods for duties and taxes on imports.

This development will impact customs brokers in the freight forwarding industry who have enjoyed protection from customs liability for the past few years. 

Following the coming into force of these amendments, there may no longer be any escape of liability for duties when a broker identifies itself as the “importer” (i.e., using its name and business number to obtain release of an import from the Canada Borde Services Agency (the “CBSA”)). 

---

CRA DIRECTS TAXPAYER TO WRONG COURT!

PROPER JURISDICTION REQUIRED AT OUTSET OF ALL TAX DISPUTES

The question of jurisdiction (that is, which Court has the authority to hear a particular dispute) remains often confused in the administration of Canadian tax law.  While the Canada Revenue Agency (“CRA”) routinely provides directions in its decision letters about where taxpayers can appeal, a recent Tax Court of Canada (“TCC”) decision demonstrates that the CRA sometimes gets this wrong – with serious consequences for taxpayers!

More problematically, a similar scenario may now be unfolding with the Canada Border Services Agency’s (“CBSA”) appeal process for remission applications made in respect of Canada’s recent retaliatory tariffs imposed on US goods.

---

NEW CRA FOCUS ON T4A REQUIREMENTS?

BUDGET 2025 CONTAINS POTENTIALLY IMPACTFUL RULES FOR DIRECT SELLERS

Canada's Budget 2025 was launched on November 4^th with the energy of a lead balloon. 

Despite the doom and gloom focus on continuing deficit financing by the current Liberal Government – off-loading today’s woes onto the backs of our children and grandchildren – there was also a not-so-well-publicized change that may impact Direct Sellers.

T4A Reporting

T4A Reporting has been a continuing issue in Canada for many Direct Sellers, especially those operating outside of the traditional "buy-and-resale" model with a distributor selling to his/her own customers (think Amway and Fuller Brush).

---

NEW BUDGET TWEAKS INDIRECT TAX RULES

BUDGET 2025 HARD TO CELEBRATE BUT PROPOSES SOME GOOD INDIRECT TAX CHANGES

Canada's Budget 2025 was launched on November 4^th with the energy of a lead balloon. Despite the doom and gloom focus on the continuing deficit financing by the Liberal Government – off-loading our current woes on the backs of our children and grandchildren – there were some (largely) positive changes from an Indirect Tax perspective.

The highlights, in our view, are as follows.

---

CBSA AUDITING STRUCTURAL STEEL

CBSA'S ONGOING SCRUTINY IN STEEL PRODUCTS CLASSIFICATION SIGNALS RISING COMPLIANCE RISK

As we have blogged here and here, the Canada Border Services Agency (the “CBSA”) sets out its priority areas for compliance audits and verifications in its Trade Compliance Verification Priorities publication.  Steel and metal products have long been among the CBSA’s primary focuses for compliance review.

Recently, the CBSA has intensified its challenges to the classification of steel containers, interpreting tariff headings in ways that go beyond prevailing industry practice.  This shift reflects a broader trend toward more aggressive enforcement in the steel sector.

For importers, this trend heightens compliance risk.  The best approach is to seek legal advice early in the audit process and resolve classification issues before they escalate into formal assessments.

---

NEW HOUSING REBATE FOR BUILDERS

TCC LOWERS THE BAR FOR "OCCUPATION AS A PLACE OF RESIDENCE"

As we have blogged here and here, homeowners who sell their newly built homes shortly after taking possession have long been a target of CRA audits.  When these homeowners also claim the GST/HST New Housing Rebate, the CRA reviews their claims closely.

A key issue in these New Housing Rebate claims is whether the homebuyers occupied the property as a place of residence after completion of construction.  In the past, courts have applied a stringent standard in interpreting what constitutes “occupation as a place of residence”.

In a recent decision, Sharma v. The King (2025 TCC 145), the Tax Court of Canada (“TCC”) lowered the bar for establishing “occupation as a place of residence”, signalling an attenuated interpretation that favours taxpayers.

---

NFR CHALLENGES UNDER CARM

CBSA'S NEW CARM PROGRAM CREATING BIG PROBLEMS FOR NFR STRUCTURES

Canada Customs’s new electronic portal, implemented in October 2024 as part of the Canada Border Services Agency (“CBSA”) Assessment and Revenue Management (“CARM”) system, is throwing up significant challenges for direct sellers trying to ship products into Canada under a personal importation basis.

Specifically, CARM is now effectively requiring all non-resident direct sellers to register as importers and denying their access to easy courier shipments.

The focal point for any of these direct sellers will now be (1) becoming entrenched in the Canadian marketplace, and (2) having all of their dietary supplement products formally registered as Natural Health Products (“NHPs”) with Health Canada.

---

CANNABIS CHARGES & EXCISE FINES

CONTRAVENING CANNABIS LAWS CAN INVOLVE TWO SEPARATE FIGHTS

The legalization of most cannabis sales in Canada comes with a number of statutes and regulations, and a detailed set of enforcement rules for those trying to operate outside the system.

Everyone knows that breaking the laws governing cannabis can lead to criminal penalties. A less well known, but very serious, consequence of noncompliance is the potential for large fines under the Excise Act(“EA”). One Canadian found this out the hard way in a recent Saskatchewan Court of Appeal (“SKA”) case.

---

FORCED LABOUR REPORTING MADE EASIER

CANADA ADOPTS NEW GLOBAL TEMPLATE FOR ANNUAL FORCED LABOUR REPORTING REQUIREMENTS

Canada has in place now, for the last two years, a comprehensive set of legal reporting requirements for companies with supply chains that may be susceptible to products made through forced labour or child labour.

We have previously written on the reporting requirements and the reporting entity conditions here and here.

This report reviews the new global template that Canada has adopted to make this reporting process easier.

---

BORDER INFRACTION CONSEQUENCES

IMMIGRATION STATUS ISSUES MAKE APPEALS A NO BRAINER

While the consequences of border infractions, either under the Customs Act (“CA”) or Proceeds of Crime (Money Laundering) and Terrorist Financing Act (“PCMLTFA”), are generally not that severe, the situation may be very different for non-citizens of Canada.

Depending on how an infraction is handled by the CBSA—and what is disclosed on immigration or citizenship applications—infractions linked to the CA and PCMLTFA can trigger inadmissibility under the Immigration and Refugee Protection Act (IRPA) or prohibitions under the Citizenship Act. Consequently, as a preventative measure, non-citizens should appeal border infractions under the relevant legislation to head off any potential quasi-criminal prosecutions and protect their status in Canada.