---

CARM’S UNINTENDED EFFECTS?

IMPORTER REGISTRATION RULE SHINING LIGHT ON NON-RESIDENTS

Download a PDF copy of this Blog here.

In Canada, the “nexus test” for determining whether a non-resident trader needs to enter Canada’s income tax and GST/HST registration systems has generally turned on a single legal question: is the non-resident “carrying on business in Canada”? This question may sound straightforward, but the answer is often very grey!

Recent import requirements by the Canada Border Services Agency (“CBSA”) under its Assessment and Revenue Management (“CARM”) initiative have shined a light on the Canadian activities of non-resident traders. The result has led many to realize that prior activities may already qualify as carrying on business in Canada.

In this Indirect Tax Report, we review the basics of carrying on business in Canada, and what that means for a non-resident trader.

The CARM Registration Requirement

Under CARM, and since January 1, 2026, every commercial importer, resident or not, must have its own Business Number (“BN”), an import-export program account and a CARM Client Portal account. A customs broker’s BN can generally no longer be used to account for an importer’s goods, and non-resident importers must obtain their BN directly from the Canada Revenue Agency (“CRA”). Many non-residents that once relied on their broker’s BN are now registering in their own name for the first time and also seeking advice on carrying on business in Canada.

Carrying on Business: Legal Tests

Paragraph 2(3)(b) of the Income Tax Act taxes non-residents carrying on business in Canada, and section 150 requires them file annual returns. Section 253 extends that concept to non-residents who solicit orders or offer goods for sale in Canada through an agent or servant. A “servant” is an employee, but the CRA has indicated that contracted employment arrangements, such as employer of record services, can be caught.

Under section 240(1) of the Excise Tax Act, a non-resident carrying on business in Canada is generally required to register for GST/HST.

The test is factual and applied case by case. The CRA’s GST/HST Policy Statement P-051R2 lists factors including where contracts are made, where goods are delivered and paid for, and whether inventory, agents or a place of business are in Canada. A non-resident acting as importer of record, warehousing goods here and selling on delivered-duty-paid terms may find several factors pointing the same way.

Why This Matters

A BN application, and the process that follows, puts a non-resident’s Canadian activities in front of the CRA. Where those activities amount to carrying on business in Canada, the exposure can include unfiled income tax returns and uncollected GST/HST, plus interest and penalties, potentially reaching back many years. Other issues may also surface, such as collecting GST/HST before registration.

Takeaways

Non-resident traders registering under CARM for the first time should treat it as more than a formality. The same facts that make them an importer of record may establish that they are carrying on business in Canada, with income tax filing and GST/HST registration obligations to follow.

Worse, prior non-compliance(s) can be highlighted. Experienced Tax & Trade Counsel can help review Canadian sales models, contracts, inventory and service arrangements, and determine the best steps to take with the CRA.

For help with issues concerning CARM and/or COB, please click here.