Trading relations between Canada and the EU
Ever since the trading agreement between Canada and the EU entered into force in October 2018, the already strong economic relationship between those two entities have entered a new phase of growth. The EU is Canada’s third biggest trading partner, right after the USA and China, and this agreement paves way for even more dynamic growth. For now, it is provisionally effective, awaiting still ratification from some of the member states.
Nevertheless, the existence of the agreement already expanded the opportunities between partners, thanks to massive tax savings that it affords exporters - 99% of duties (or tariff lines) on goods and services were by now effectively eliminated. It also includes mutual recognition of certain professions: architects, engineers, accountants, and paves ways for more fluid exchange of employees between companies on both continents.
In more detail, CETA entails such changes:
- Modernized and and standardized customs procedures that shrink the costs they incurred in the past
- Simplified and sometimes also automated procedures for the efficient release of some of the goods on arrival, especially low-value ones;
- Clarity and transparency around customs and tariffs
- From that point, Canada has a right to participate in procurement opportunities in the EU states, providing governments of the member states, as well as authorities on lower levels and some of the companies in the utilities sector, with their products and services.
What goods and services travel between the EU and Canada?
In 2020, the value of trade in goods between the EU and Canada was €53.3 billion - 8.2% of its total trade in goods, while Canada received 1.5% of the European Union’s externally traded products.
On the list of most important categories of products traded between the continents are:
- Machinery (36% of EU exports to Canada and 21% of its imports).
- Chemical and pharmaceutical products (24% of EU exports and 17% of its imports).
- Agricultural products (reaching 7,274 million Euros in goods sent between parties in 2020 and experiencing a steady, yearly growth)
- Ores, ash and slag (grew almost 100% over the span of the past 4 years, to 3,5 million euros in total in 2020)
Another important element of those relations are services - the European Union exports its telecommunications, computer and information services to Canada, as well as transport and use of certain Intellectual properties. The value of trade in services reached €25.6 billion in 2020.
How to export goods from Canada to the EU?
The agreement allowed for preferential access of small and medium businesses based in Canada to the European market, and encompassed practically the whole service sector. Maybe the most important change in the relations comes from the fact that tests and certificates on goods and products have been unified, making it significantly easier for parties to trade.
If you are interested in the conditions under which your company (based in Canada) can participate in procurement in the EU, we recommend checking this detailed guide for businesses on the subject.
VAT - how does it work under CETA?
Value Added Tax varies, depending on the country that imports the goods, and has to be paid by the importer. What’s particular in case of Canada - EU relations here is that products arriving in the EU are subject to VAT at their point of entry, yet in case their actual use is intended elsewhere, they might be subject to VAT-suspensive arrangement, relegating the taxation to the country of final destination.
In principle, the EU rates look as follow:
- standard rates may not be less than 15%
- reduced rates may not be less than 5%
- for some goods or services, the reduced rate cannot be lower than 12%
- certain EU countries may maintain reduced rates lower than 5%
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- 1. Trading relations between Canada and the EU
- 2. In more detail, CETA entails such changes:
- 3. What goods and services travel between the EU and Canada?
- 4. How to export goods from Canada to the EU?
- 5. VAT - how does it work under CETA?
- 6. In principle, the EU rates look as follow:
- 7. The B2B Pay Solution
- 8. We’re also all partnered-up
- 9. B2B exporters: Simple, fast, transparent and low-cost international financial transactions with B2B Pay