Input tax credits

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What is an input tax credit?

As a GST/HST registrant, you recover the GST/HST paid or payable on purchases and expenses related to your commercial activities by claiming input tax credits (ITCs).

You may be eligible to claim ITCs only to the extent that your purchases and expenses are for consumption, use, or supply in your commercial activities.

To claim an ITC, the expenses or purchases must be reasonable in quality, nature, and cost in relation to the nature of your business.

List of common purchases and expenses for which you may be eligible to claim ITCs
  • business start-up costs
  • business-use-of-home expenses
  • delivery and freight charges
  • fuel costs
  • legal, accounting, and other professional fees
  • maintenance and repairs
  • meals and entertainment (allowable part only)
  • motor vehicle expenses
  • office expenses
  • rent
  • telephone and utilities
  • travel
List of common purchases and expenses for which you cannot claim ITCs
  • certain capital property
  • taxable supplies of property and services bought or imported to make exempt supplies of property and services
  • membership fees or dues to any club whose main purpose is to provide recreation, dining, or sporting facilities (including fitness clubs, golf clubs, and hunting and fishing clubs), unless you acquire the memberships to resell in the course of your business
  • property or services you bought or imported for your personal consumption, use, or enjoyment

Are you eligible to claim ITCs?

You may be eligible to claim an ITC if all of the following apply:

  • You acquired, imported or brought into a participating province property or services for consumption, use, or supply in the course of your commercial activities
  • You are a GST/HST registrant during the reporting period in which the GST/HST was paid or became payable on property or services
  • GST/HST must have been paid or payable by you in respect of the supply, importation, or bringing in of the property or services
  • You obtain sufficient documentary evidence to substantiate the ITC prior to making the claim in a GST/HST return. For more information, see What records do you need to support your claim for ITCs?
  • You claim the ITC in a GST/HST return filed within the time limit. For more information, see What is the time limit for claiming ITCs?

If you use the quick method of accounting you cannot claim ITCs for your operating expenses. However, you may be eligible to claim ITCs for certain purchases such as purchases of land and purchases for which you can claim a capital cost allowance for income tax purposes, such as computers, vehicles, and other large equipment and machinery. For more information, see the quick method of accounting.

Most charities are limited in the ITCs that they can claim because of the special calculation method called the "net tax calculation for charities" that they must use to complete their GST/HST returns. For more information, see calculation method assigned to charities.

What if you are a new registrant?

If you are a new registrant, you may be eligible to claim an ITC for the GST/HST paid or payable on property such as capital property, real property, and inventory that you had on hand to use in your commercial activities at the time you became a registrant. We consider that you bought the property at that time and paid GST/HST equal to the basic tax content of the property. For more information, see How to determine the percentage of use when there is a change in use, sale or improvements to capital personal property.

You may also be eligible to claim an ITC for any GST/HST you prepaid for rent, royalties, or similar payments for property that relate to the period after you became a registrant, to the extent that the property is for consumption, use, or supply in the course of your commercial activities. You cannot claim an ITC for the GST/HST paid or payable on services supplied to you before you became a registrant, or on the value of any rent, royalty, or similar payment that relates to a period before you became a registrant, even if you paid that GST/HST after you became a registrant.

Example

You prepaid three months of rent for office space for use in your commercial activities for the period January 1, 2016, to March 31, 2016. If you became a registrant on March 1, 2016, you can claim an ITC for the GST/HST you paid on rent for the month of March. You cannot claim an ITC for the GST/HST you paid for rent from January 1 to February 28 because that amount relates to the period before you became a registrant.

How do you calculate your ITCs?

Generally, if you have an eligible expense that you intend to use only in your commercial activities, you can claim ITCs for the full amount of the GST/HST paid. In certain situations there are restrictions on the amount that you can claim as an ITC. For more information on how to calculate ITCs for different type of expenses, see Calculating input tax credits.

How do you claim your ITCs?

Once you calculated the amount you can claim, you report it on line 108 (or line 106 if you file on paper) of your GST/HST return.

Recapture of ITCs for large businesses

As a result of British Columbia, Ontario, and Prince Edward Island harmonizing their provincial sales tax with the GST to implement the HST, as a temporary measure, large businesses have to recapture (repay) their ITCs for the provincial part of the HST paid or payable on specified property and services. Generally, you would be a large business during a given recapture period if your total revenue from annual taxable supplies is greater than $10 million in your last fiscal year that ended before a recapture period. Certain financial institutions would also be subject to these rules even if their revenue does not exceed the $10 million threshold.

Generally, you must report your recaptured ITCs in the reporting period in which the ITCs first became available. Failing to recapture ITCs as and when required could result in penalties.

To simplify compliance, Form RC4531, Election or Revocation of an Election to Use the Estimation and Reconciliation Method to Report the Recapture of Input Tax Credits, allows large businesses to estimate the amount of recaptured ITCs in their monthly or quarterly reporting periods and reconcile any differences between the amounts reported during the fiscal year and the actual amounts at fiscal year-end, using Schedule C, Reconciliation of Recaptured Input Tax Credits (RITCs), within three months of the fiscal year-end.

For information on incorrectly reported recaptured ITCs, see How do you correct a previously filed GST/HST return?

For more information on the recapture of ITCs, see GST/HST Technical Information Bulletin B-104, Harmonized Sales Tax – Temporary Recapture of Input Tax Credits in Ontario and British Columbia and GST/HST Info Sheets GI-165, Prince Edward Island: Transition to the Harmonized Sales Tax – Builders and Recaptured Input Tax Credits and GI-171, Phasing out of Recaptured Input Tax Credits in Ontario.

What is the time limit for claiming ITCs?

Most GST/HST registrants claim their ITCs when they file their GST/HST return for the reporting period in which they made their purchases. However, you may have ITCs that you did not claim when you filed the return for the corresponding reporting period.

If so, you can claim those previously unclaimed ITCs on a future GST/HST return. ITCs must be claimed by the due date of the return for the last reporting period that ends within four years after the end of the reporting period in which the ITC could have first been claimed.

Example

You are a quarterly filer and you buy office furniture in the reporting period October 1, 2015, to December 31, 2015, for which you can claim an ITC. The due date of the return for this reporting period is January 31, 2016.

The last reporting period in which you can claim an ITC for the tax you were charged on the office furniture is the reporting period October 1, 2019 to December 31, 2019. The due date for this return is January 31, 2020. This means that you can claim the ITC in any return due and filed by January 31, 2020.

Time limit reduced to two years for certain businesses

The time limit for claiming ITCs is reduced to two years for:

  • listed financial institutions (other than a corporation that is considered to be a financial institution because it has an election in effect to have certain supplies deemed to be exempt financial services); and
  • persons with annual revenues from taxable supplies of property and services of more than $6 million for each of the two preceding fiscal years, except for:
    • charities, or
    • persons whose supplies of property and services (other than financial services) during either of the two preceding fiscal years are at least 90% taxable supplies.

Under the two-year limit, you can claim your ITCs on any future return that is filed by the due date of the return for the last reporting period that ends within two years after the end of your fiscal year. This two year period must include the reporting period in which the ITC could have first been claimed.

Example

You are a monthly filer with a fiscal year-end of December 31. You buy goods in the reporting period September 1 to 30, 2015, for which you can claim an ITC. The fiscal year that includes the September 2015 return ends on December 31, 2015. You can claim the ITC on any later return for a reporting period that ends by December 31, 2017 and is filed by January 31, 2018.

What records do you need to support your claim?

As a GST/HST registrant you have to provide specific information on the invoices, receipts, contracts, or other business papers when providing taxable property and services. A purchaser needs this information to claim eligible ITCs.

To ensure that your ITC claims only include GST/HST charged by someone who is registered for GST/HST, see Confirming a GST/HST account number. To confirm a QST number, go to Revenu Québec.

The following chart provides information that needs to be included on your receipts and invoices to support your claim:

Information requirements for sales invoices

Information required Under $30 $30 to $149.99 $150 or more
Supplier's business or trading name, or an intermediary's name Yes Yes Yes
Date of invoice or, if no invoice issued, the date tax is paid or payable Yes Yes Yes
Total amount paid or payable Yes Yes Yes
An indication of the total amount of GST/HST charged or that the amount paid or payable for each taxable supply (other than zero-rated supplies) includes the GST/HST at the applicable rate No Yes Yes
An indication of which items are taxed at the GST rate and which are taxed at the HST rate No Yes Yes
The supplier's business number (BN) or an intermediary's BN No Yes Yes
Your name or trading name or the name of their authorized agent or representative No No Yes
A brief description of the goods or services No No Yes
Terms of payment No No Yes

Exceptions to invoice requirements

Documentation requirements have been reduced in certain circumstances.

Allowances or reimbursement of expenses to an employee or partner

For allowances or reimbursement of expenses to an employee or partner, your books and records have to show:

  • the name and BN of the employer or partnership that paid the allowance or reimbursement
  • the name of the employee or member of the partnership who has received the allowance or reimbursement
  • the total amount of the allowance or reimbursement received by each employee or member of the partnership
  • the total GST/HST considered to have been paid for the allowance or reimbursement
  • the reporting period in which the allowance or reimbursement was paid
  • the type of the supply/expense
Computerized books and records

Computerized books and records have to indicate:

  • the name or trading name and address of the supplier or that of the supplier's authorized agent or representative
  • the supplier's business registration number (BN)
  • the date the GST/HST was paid or became payable and the amount of GST/HST paid or payable
  • the type of the supply
  • the name or trading name and address of the recipient of the supply or that of the recipient's authorized agent or representative
Contractual agreements

For contractual agreements, the books and records and related documents have to show:

  • the name or trading name and address of the supplier or that of the supplier's authorized agent or representative
  • the supplier's BN
  • the reporting period when the GST/HST was paid or became payable and the amount of GST/HST paid or payable
  • the type of the supply
  • the name or trading name and address of the recipient of the supply or that of the recipient's authorized agent or representative
Unvouchered cash payments to coin and dollar bill operated machines

For unvouchered cash payments to coin and dollar bill operated machines, your books and records have to show:

  • the location where the taxable supply was made
  • the reporting period when the GST/HST was paid or became payable
  • the amount paid for the supply
  • the amount of GST/HST paid or payable
  • the type and quantity of the supply
Procurement cards

For procurement cards, under certain conditions the CRA will consider the following minimum information to constitute satisfactory supporting documentation at the time of claiming ITCs:

  • date of transaction
  • merchant name
  • place of supply (City and/or Province)
  • merchant category
  • transaction amount
  • cardholder (employee) name
  • procurement card number

For more information, see Procurement cards - Documentary Requirements for Claiming Input Tax Credits.

Taxi or limousine fares

For taxi and limousine fares, your books and records have to show:

  • the supplier's name or trade name
  • the date of the supply
  • the fare
  • the amount of GST/HST charged, or a statement that the fare includes GST/HST

 

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