Marine Capsule

10. Taxes and duty fees

PURCHASE IN CANADA

Use in the province of purchase

Seller is a dealer

If the seller is a dealer, his business must be registered with government authorities managing the federal sales tax (GST) and the provincial sales tax (PST). His tax registration numbers must appear on its sales contracts. Normally, this seller will charge these two sales taxes if you are a resident of his province.

If you remit to the dealer, as partial payment, another asset, called trade-in, the sale taxes will be figured out on the difference between the new vessel selling price and the amount allocated for the trade-in.

The two sales taxes are payable to the seller.

Seller is an individual.

The federal tax (GST)  is not payable for a vessel sold by an individual not registered at the sales tax department.

The provincial sales tax is payable in some provinces even though the seller is not registered. Ex. Payable in Ontario but not in Quebec.

Purchase in Ontario, the boat is brought in another province

Seller is a boat dealer

For boats, the Ontario dealer will not collect from a resident of another province, his Ontario sales tax (PST) except in rare occasions, this at the condition that the boat leaves the Ontario territory within 30 days of the date of purchase with a proof of that. One of the exceptions maybe: some dealers have agreements with the Sales Tax Dept of certain other provinces. These dealers are usually physically close to the border of the other province. Stay alert to these situations; ask proper questions. 

Should an Ontario dealer have charged the Ontario sales tax to a Canadian living in another province, it is possible for this person to claim a reimbursement to the Ontario authorities. This claim must be presented within a four year period. However, the vessel must have left permanently the Ontario territory within 30 days following the purchase. Proof of the vessel's arrival in the other province and proof of tax payment in the other province have to be attached to the claim.

Usually, an Ontario dealer does not charge the provincial tax if he delivers the boat in another province or uses a public carrier to do so.

For more information please contact the Ministry of Finance of Ontario, Retail Tax Refund, at: (800) 615-2757.

Seller is an individual

The Ontario provincial sales tax is payable for sales by an individual. However, it is not required if the vessel leaves the territory of this province within 30 days of the purchase. It is important to keep a proof of the vessel arrival in the other province.

Vessel purchased outside of Quebec and brought in Quebec.

When an asset purchased outside of Quebec is brought to Quebec for use in Quebec, provincial sales tax is payable. The buyer must declare this purchase and pay the required sales tax. We recommend that you review section 17 of the Quebec Sales Tax

VESSEL PURCHASED OUTSIDE OF CANADA

General overview

  • When a vessel purchased in another country doesn't navigate in Canada, no sales tax or duty fees are payable in Canada
  • A vessel purchased from a dealer in Canada and delivered outside of the country, by the seller or by a public carrier is not subject to Canadian taxes. The buyer cannot move on his own the vessel out of the country. The vessel shall not navigate in Canada as long as the Canadian taxes not have not been paid
  • The only possible Canadian registration for these boats is the Certificate of Registry (formerly called "Blue Book")
     
  • The local sales taxes of the place where the vessel is standing at the time of purchase, if any, are payable for all vessels but there are exceptions 

  • Sales taxes paid to a foreign Government are not credited by Canadian Authorities

  • If a vessel registration is transferable to a buyer and this last one wants the vessel registered to his name, he will have to pay the local sales taxes

  • Some foreign registrations are not transferable to Canadian buyer. Ex.: The United States Certificate of Documentation

  • If the vessel, later on, comes to Canada for navigation, she will be imported. At that moment, the taxes will be figured out on the value of the vessel at this moment and not on the value the vessel had at time of purchase

Canadian navigating with foreign registration

This sounds suspicious. One can questions : Why does the Canadian owner not use the registration of his country considering that Canada is recognized everywhere as an agreement and cooperation country.

A Delaware (USA) registration for Canadian leads to suspicion. Other countries know that a Canadian can have a vessel registered in Canada and navigate everywhere without having to pay Canadian taxes as long as it does not navigate in Canada. For what purpose has this registration been obtained ?

If a vessel, owned by a Canadian and registered in another country, comes to Canada for navigation, the custom agents will tend to ask themselves the following question: Does this Canadian have the right to navigate in Canada with such a vessel ? Have taxes been paid ? 

And, if the vessel was in the name of a company, the Canadian Custom will be inclined to investigate to ensure that no Canadian is involved in the company. Their investigation is facilitated by the good cooperation and agreements between Canada and many other countries.

IN BOND VESSELS

A vessel owned by a Canadian, whether it was build in Canada of elsewhere, and for which sales taxes and customs duties were not paid in Canada is called "in bond". This status is legal, however, the vessel may not navigate freely in Canada. There are large numbers of these vessels in USA (Lake Champlain NY, Florida, etc.), in the Caribbean or elsewhere around the world.

Canadian registration

The only Canadian registration issued for in bond vessels is the Canadian Certificate of Registry. For more details, see the Marine capsule No. 3, Registration, Canada and other countries

Vessel kept in United States

There is some risk of being taxed by the state authorities where the vessel is kept. Some states consider that the boat of a foreign person navigating in their waters for more than 30 days and not having paid the local taxes will need to pay them. This tax is called "Users Tax". It is the same rate than the usual sales tax.

Some states having other priorities don’t follow very closely their vessel tax records.

Other states, having an economy mainly based on tourism revenue, such as Florida, have laws encouraging foreign citizens to keep their vessel there. If their law is strictly followed, there is no problem with local authorities.

In bond vessel coming to Canada

An In bond  vessel may come to Canada, under very strict restrictions

  • An application for temporary entry must have been previously approved (form E29 - B) by the Canada Customs and Revenue Agency
  • Usually this process is initiated by a Canadian boat dealer. Most of the dealers close to the border with the United States are familiar with this type of transactions
  • The purpose of the entry in Canada must be a vessel repair or maintenance. A cost estimate must previously have been issued by a dealer/repairer.
  • The vessel must directly go to the dealer or repairer.  No question of "small detour at grand' ma"
  • If the vessel entered into the country during the spring or the summer season, the expiration date of authorization is established depending on the type of repairs to be done. The vessel must leave the country at the latest by this specific date limit
  • If the vessel came during the fall or winter, its repairs can be done during the winter, but it must have left the country by the following June 15th
  • Customs officers regularly personally check if the vessel is still on the repairer site
  • Missing one of these rules can lead to seizure of the vessel, mandatory taxes payment, customs duties and a strong fine

Sale of an in bond vessel

An “In bond” vessel cannot be sold while on the Canadian soil or in Canadian waters without having the taxes paid, so, in order to make a sale, it has to be taken out of Canada before, otherwise, the boat could be seized and all the applicable taxes claimed.

Importing a vessels to Canada

Vessel custom fees

As per NAFTA (North American Free Trade Agreement), a vessel built in a member country (Canada, USA or Mexico) with materials from one of these countries is exempt from customs fees. The NAFTA certificate of origin prepared by the builder must accompany the vessel at time of importing. However, it appears that for some well known builders, the process is made easier when the document is not available.

It sometimes happens that a US buyer has to pay US duty fees for a Canadian built vessel purchased from a Canadian person. This is when the vessel was built by a not very well known builder and that this builder has closed his business and no NAFTA certificate is available. The contrary is also possible.

Pleasure vessels built in a country other than one of the NAFTA group  have to pay the following duty fees:

  • If imported in Canada: 9.5 %
  • If imported in USA: 1.5 %, plus other miscellaneous fees

Vessels built by Beneteau at their plant in Marion, South Carolina, USA are exempted from custom duty fees but those built at their plant in France are subject to custom and duty fees.

For more details, you can click the following Wikipedia link: NAFTA

Sales tax

In addition to custom duties, the following sales taxes are payable :

  • Federal sales tax (GST)
  • Provincial Sales Tax (PST) in the province of the buyer

NAVIGATION IN UNITED STATES

Cruising License and Decals

A Cruising License is a document issued by the U.S. Customs Authorities to navigate more easily  in the U.S. territory. It is issued for one year. To renew, the vessel must leave the U.S. territory, return and request a new document. The cost is nominal. We strongly recommend that you get one.

The following Web sites give more details on the subject:

SALES TAX IN UNITED STATES

Each state has its own rules for taxes. It would be cumbersome to provide detailed information on each of them. Below are the details of the most popular States for Canadians.

Maryland

If you sign an affidavit confirming that you will not navigate for more than 180 days per year in this State, no tax will be required.

New York and Vermont

A few years ago these states were sending their representatives in different marinas along Lake Champlain searching vessels owned by Canadians. When found, owners would receive a notice requesting the payment of their sales tax. They were asking the owners to prove that they had already paid taxes in Canada, if not, the payment of their tax was required to be paid. The tax was called "Sales/User Tax".

The State of New York accompanied this notice with a “red colored” return envelope. Panic-stricken, many Canadian owners called us for help; most of them were leaving the US territory for ever.

It seems that the diligent representives of many business owners for these two states have pushed the authorities to show more flexibility in their tax collecting strategy, so as to encourage tourism and not put it away. 

Florida

A vessel can stay in Florida indefinitely and no sales tax has to be paid if:

  • She is registered in a foreign country (Ex..: Canada)
  • The Cruising license is active, not expired

Purchase from a dealer or through a broker

  • A Florida Tax Affidavit signed by a buyer has to be presented to the Florida authorities within five (5) days of the sale, not a day more
  • A "90-Day Decal" will be issued. This sticker will be affixed immediately on the vessel hull
  • The vessel will have to get out of Florida within 90 days. Proof of the coming out accompanied with a copy of the Canadian registration has to be faxed immediately after to the Florida Department of Revenue
  • If the vessel returns back, she must be registered in another country. In this case, Florida's Authorities will issue, upon request, a "cruising license" valid for one year

PURCHASE IN ANOTHER COUNTRY

Many vessels are purchased in the Caribbean (British Virgin Islands, Guadeloupe, etc.). Each country has its own rules. It is a good idea to get information before presenting an offer or completing a purchase.


This writing is a short summary of some of the topics to consider in relation with a vessel purchase, sale or credit.

 
    
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Hebergement Webdynamique Inc. Montreal,Qc,CANADA