If you import goods or services from outside Canada, your small business may owe GST/HST under a mechanism called "reverse charge." Unlike standard purchases where the supplier charges tax, reverse charge makes you (the importer) responsible for self-assessing and paying the tax directly to the CRA. This rule applies to registered GST/HST businesses importing taxable supplies, even if the foreign seller doesn't charge Canadian tax. Understanding when reverse charge applies helps you avoid penalties and manage your input tax credits correctly. Reverse charge is a GST/HST collection method the CRA uses to ensure tax gets paid on cross-border transactions. Instead of collecting tax at the border like they do for goods, the CRA relies on the importer to calculate and remit tax themselves. This applies when: You import a taxable supply (goods or services) from outside Canada You're registered for GST/HST The foreign supplier doesn't charge you Canadian GST/HST The supply isn't otherwise exempt under the rules The key point: you become the "collector" of tax on your own purchase, which sounds odd but is how the CRA closes gaps in international trade. This is where most small businesses encounter reverse charge.
No, GST/HST registration isn't triggered by importing. However, if you're already registered and import taxable supplies, reverse charge rules apply. If you're unregistered and import regularly, you may need to register once your revenue exceeds the threshold ($30,000 in a 12-month period for 2026).
Yes, you can claim the input tax credit on the same return where you self-assessed the reverse charge tax, provided you have proper documentation and the supply was for a business purpose. The credit and the tax usually net to zero, but the timing and documentation are critical.
If a foreign supplier incorrectly charges you Canadian GST/HST, you should not apply reverse charge on top of it. Keep the invoice showing the tax charged and claim that as your input tax credit instead. Report the situation to the CRA if the supplier repeatedly charges incorrectly.
Yes, reverse charge applies to imports from any country outside Canada, including the US and UK, as long as the supplier doesn't charge you Canadian GST/HST and the supply is taxable. The supplier's location doesn't matter; what matters is whether they're registered to charge Canadian tax.
You report reverse charge items on each GST/HST return (quarterly, annual, or monthly depending on your filing frequency) in the period when you received the supply. Include all reverse charge calculations and supporting documentation for that period.