The EDCP is administered by the Canada Revenue Agency (CRA) and is intended to benefit businesses that import goods and/or acquire goods in Canada, process them to add limited value and then export them.
If you qualify for the program, you don’t have to pay GST/HST on most of your imported goods, or on domestic purchases of goods worth $1,000 or more. This improves your cash flow because you don’t need to pay the taxes up front, claim an input tax credit on your GST/HST return and then wait for your net tax refund to arrive.
How does the EDCP work?
EDCP participants typically import goods from abroad and/or acquire them in Canada, process them to add limited value and then export the value-added goods to customers outside Canada. The “limited value” criterion is a key factor here, since the EDCP is not intended to benefit companies that manufacture or pro- duce new products that they then export.
The program is therefore of particular benefit to businesses that are involved in the processing of goods such as distributing, disassembling, reassembling, displaying, inspecting, labelling, packing, storing, testing, cleaning, diluting, maintaining and servicing, preserving, sorting, grading, trimming, filing, slitting or cutting.
Who can participate in the EDCP?
You may be eligible for the EDCP if the following applies to you:
- At least 90 per cent of your operations for the fiscal year are commercial activities.
- At least 90 per cent of your business revenues for the fiscal year come from export sales.
- You add only limited value to your customers’ goods that you import or take possession of in Canada during the fiscal year, as follows:
- the value you add through the provision of non-basic services is 10 per cent or less; or
- the value you add, calculated as the total of non-basic services provided plus basic services provided, is 20 per cent or less.
- You do not substantially alter goods, for example by producing or manufacturing goods.