On April 23, 2009, the Supreme Court of Canada rendered a decision in the case of United Parcel Service Canada Ltd. v. Her Majesty the Queen [2009] with respect to the recovery of amounts paid as tax in error on imported goods. This notice issued by the Canada Revenue Agency (“CRA”) explains its view on the impact of the decision for GST/HST purposes.
In this case, United Parcel Service Canada Ltd. (“UPS”), as a licensed customs broker, acted as an agent on behalf of its customers for the importation of goods and, while acting as agent, it paid amounts as tax in error. UPS did not seek a reimbursement of the overpayments from its customers, but rather deducted the amounts in its monthly GST/HST returns, which the CRA subsequently denied. The Court concluded that, although UPS did not have a liability to pay tax in respect of the importations had tax been payable, it was entitled to a rebate of the overpayments and these payments could be recovered as a deduction in its return.
The CRA now acknowledges that this decision also applies to the recovery tax paid in error in respect of supplies in certain other circumstances, provided the person (e.g., a customs broker or agent): does not have a liability to pay tax in respect of an importation of goods or a supply; pays tax in respect of the importation or supply; has not been reimbursed the amount by the person obligated to pay tax; and has taken the necessary steps to establish that the amount was not payable and that an overpayment of tax was made.