Understanding Canadian Duty & Tax Calculation | ARGO Customs

If you are trying to import goods into Canada, you have to calculate the value allocated for duty and tax accurately. Some vendors also offer discounts. If you fail to take these costs into account, you risk selling your goods for too little, losing money, or even failing to pay the appropriate duty and becoming subject to penalties. ARGO Customs Brokers can help you calculate your tax and go over the treatment of price reduction in ascertaining value using the transaction value method.

Price Reductions and Discounts

If you receive a price reduction, then that means the price paid or payable for certain goods was reduced by the vendor. Discounts are reductions in price offered by vendors in exchange for the purchase agreeing to undertake certain obligations, such as meeting certain conditions.

For instance, a vendor may offer a discount if the purchaser offers prompt payment or because the purchaser provides a high number of units.

Effect of Discounts on Tax Calculations

A deferred discount refers to a discount that is applied retroactively by the vendor if the purchase satisfies agreed conditions. If you negotiate or accept the discount prior to importing the goods, then the discount is considered in effect at the time of the import if the discount is agreed to under a writing that was in existence at the time the goods were imported. The writing does not need to be an executed contract, it could also be considered reciprocal invoices, bills, or even emails.

Once you identify the price for the imported good, vendors can also agree to give you a credit or similar compensation depending on the circumstances. The credit typically represents an amount that is already paid to the vendor from an earlier transaction. The credit is not a factor in the calculation of the transaction value for imported goods. Credits are indirect payments that do not reduce the price paid or payable for the goods. The price payable for goods or paid are all direct and indirect payments to or for the benefit of vendors.

Trade-ins are goods which are accepted as partial or full payment for a purchase (similar to a trade-in for a new car). The value of trade-ins may vary from vendor to vendor. If you use trade-ins, then you cannot use the transaction value method.

Seek Assistance from Customs Broker About Canadian Duty & Tax Calculation

On your invoices, you could have several discounts at the same time – even on the same goods. If you need help calculating Canadian duties and taxes, then you may want to contact ARGO Customs Brokers for assistance.