Input tax credits (ITCs)

A fundamental principal of GST/HST is that no tax should be incorporated into the cost of inputs that registrants use in commercial activities. With certain exceptions, registrants are entitled to a refundable credit, called an input tax credit (ITC), for tax paid or payable on purchases that relate to a commercial activity.

Commercial activities include the supply of goods and services taxable at 0%, 5% and 13%. Commercial activities do not include the supply of exempt goods and services, such as long-term residential rent (for example, of one month or more). Therefore, you cannot claim ITCs for the GST/HST you paid or owe on items that you use to provide exempt goods and services, or for personal use.

You can recover the GST/HST you pay or owe on goods and services you use in operating a business of making taxable supplies. Examples are:

• merchandise you purchase for resale
• advertising services
• personal and real capital property, such as office furniture, vehicles, other equipment, and buildings used in the operation of the business
• general operating expenses such as office rent, utilities, office supplies, and the rental of equipment such as computers, vehicles, photocopy machines, and other office appliances.

Where goods or services are used partly for personal use or for making exempt supplies, you are entitled to a partial ITC to the extent that they are for use in commercial activities, with certain exceptions for capital property, as discussed below.

Expenses for which you cannot claim an ITC include the following:

• employee wages
• interest and dividend payments
• most federal, provincial, and municipal taxes
• most fees, fines, and levies
• tax-exempt goods and services
• items for your personal use or enjoyment
• capital personal property that is not primarily for use in your commercial activities
• capital real property for use 10% or less in your commercial activities (If you are an individual using the property more than 50% for your, or a related individuals', personal use, you cannot claim an ITC even if you are using that property more than 10% in commercial activities.)
• membership fees or dues to any club that provides recreational, dining, or sporting facilities (such as fitness clubs, golf clubs, hunting and fishing clubs), unless you acquire the memberships to resell in the course of your business.

For more information, see the General Information for GST/HST Registrants guide.

How to claim an input tax credit

Most registrants claim their ITCs when they file their GST/HST return for the reporting period in which the related purchases were made. If you do not claim ITCs at that time, you have four years after the end of that reporting period to claim them on a GST/HST return.

When you calculate your ITCs, you can include purchases for which you have received an invoice, but that you have not yet paid.