HST when dealing with US clients
By Philippe Brideau | January 22, 2012
A. Simpson asked:
We are a small incorporated Canadian manufacturing company. We have a Canadian supplier that charges us in Canadian dollars for product and then on a separate invoice line charges a U.S. "currency adjustment" amount-which is calculated based on the previous month's average U.S. exchange rate multiplied by the cost of goods from the previous invoice line. They then charge HST on the full amount. Are they required to charge HST on the U.S. currency adjustment amount?
Philippe Brideau answered:
Based on the limited information in the question, it would seem that the arrangement you have with your Canadian supplier includes your paying a U.S. dollar premium on the consideration payable (e.g. the amount payable) to your Canadian supplier. How this premium is calculated would be something that would be determined between your company and your Canadian supplier.
A person that pays or agrees to pay the consideration (e.g., the amount payable) for taxable supplies made in Canada must generally pay the GST/HST based on the value of consideration for a supply.
In this example, if your Canadian supplier has to be registered for GST/HST purposes, your supplier would have to charge you the GST/HST on the total amount payable for the supply, including the US currency adjustment amount, since it forms part of the amount that is being charged for the supply of the goods.