Do You Charge GST/HST to US and International Clients?
- Targeted Accounting
- Business
Table of Contents
Do You Charge GST/HST to Foreign Clients? Usually No
The short answer is that most sales to customers outside Canada are zero-rated. You charge 0% GST/HST, you report the sale on your return, and you still claim input tax credits on the costs of making it. That is a favourable position, and it is one of the reasons exporting Canadian businesses like the GST/HST system.
The longer answer is that “outside Canada” is a legal test, not a shipping address, and the CRA can reassess you for 13% of every foreign invoice if you cannot show the test was met. This article explains what zero-rated means, which exports qualify, which do not, and what records to keep. It builds on the rules in our complete GST/HST guide.
Zero-Rated Versus Exempt
GST/HST has three categories of sale and the difference matters more here than anywhere else.
Taxable sales carry the full rate. Exempt sales, such as most residential rent, most health care and most financial services, carry no tax, but the seller cannot recover the tax paid on related costs. Zero-rated sales are taxable at a rate of 0%: the customer pays nothing, and the seller still claims input tax credits on everything that went into the sale.
Exports fall in the third category. A Toronto software consultant billing a client in Chicago charges no tax and still recovers the HST on her laptop, her office and her subscriptions. If most of your revenue is foreign you will often be in a refund position, which is one good reason to file quarterly or monthly rather than annually.
GST/HST on Exported Goods
Tangible goods are zero-rated when you ship or deliver them to a destination outside Canada. The conditions are practical: the customer must not be buying for consumption in Canada, the goods must leave the country within a reasonable time, and you must keep evidence that they did.
Evidence means shipping documents, customs paperwork, courier tracking, or a carrier’s bill of lading showing a foreign destination. A US customer who picks the goods up from your warehouse in Mississauga and drives them across the border is a harder case; you generally need to charge tax unless you can meet the specific conditions for goods exported by the purchaser.
Online sellers shipping small parcels internationally meet the test easily, as long as the platform or courier records are kept. Our guide to bookkeeping for e-commerce businesses covers the record-keeping side.
Services and Intangibles to Non-Residents
Services supplied to a non-resident are zero-rated under the general rule in Schedule VI of the Excise Tax Act, but the exceptions are where reassessments happen. A service is not zero-rated when it is:
- supplied to an individual while they are physically in Canada, for example a US tourist getting a haircut or a consultation in your Toronto office;
- related to real property in Canada, such as managing or inspecting a building here;
- performed on tangible personal property that is in Canada, such as repairing equipment that stays in Canada;
- a telecommunication service, or an agent service arranging a taxable sale in Canada;
- supplied to a non-resident who is registered for GST/HST.
The everyday cases for a Canadian service business, such as consulting, design, software development, marketing or bookkeeping delivered remotely to a US company, fall comfortably inside the zero-rated rule. Intangible property such as software licences, digital content and intellectual property rights follows similar logic: zero-rated to a non-resident who is not registered, as long as the rights are not for use primarily in Canada.
Consultants with a mix of Canadian and foreign clients will find more on structuring this in our guide to bookkeeping for consultants.
The Records That Protect You
The CRA’s position on audit is simple: a zero-rated sale is a taxable sale on which you chose to charge 0%, and the burden of proving you were entitled to do so is yours. The records that satisfy that burden are:
- the customer’s name and foreign address on the invoice;
- a statement, in a contract or an email, that the customer is not resident in Canada and, for services, that they are not registered for GST/HST;
- for goods, proof of export as described above;
- a note of where the service was performed and where the customer was when they received it.
Show the sale on your invoice with a tax line of $0 and the words “zero-rated” or “export” rather than leaving the tax line blank. It makes the treatment deliberate and obvious to a reviewer.
In your books, use a separate sales tax code for zero-rated sales so they flow to line 90 of the return as taxable sales at 0% and are not mistaken for exempt income. Getting this wrong understates your total taxable supplies, which affects your filing frequency and, for smaller businesses, the registration threshold.
Three Common Mistakes With Zero-Rated Sales
Assuming a foreign address settles it. A US company with an office in Canada that receives your service here is a Canadian supply. Ask where the work is used, not just where the invoice goes.
Forgetting the threshold. Zero-rated revenue counts toward the $30,000 small supplier test. A freelancer with $40,000 of purely American clients must register even though she will never remit a dollar; registration is what lets her claim her credits back.
Confusing GST/HST with US sales tax. Zero-rating is a Canadian question. Whether you owe sales tax in a US state is a separate one governed by that state’s rules, and many states now apply economic nexus thresholds to remote sellers. Selling to the US at any scale means checking both sides of the border.
Selling Outside Canada and Not Sure You're Handling the Tax Correctly?
We review your foreign sales, set up the right tax codes in your books, and put the non-residency records in place so a CRA review is a formality. Most reviews are done within a week.
