Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 11th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 161347
Dear [Client]:
Subject: GST/HST INTERPRETATION
Requirement to recapture input tax credits on qualifying motor vehicles
Thank you for your letter concerning the application of the goods and services tax/harmonized sales tax (GST/HST) and the requirement to recapture input tax credits (ITCs) by large businesses on qualifying motor vehicles. We apologize for the delay in responding.
The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
We understand the following:
1. Your client is a […] (the Company), and is a large business for the purposes of section 236.01 of the ETA, and section 27 of the New Harmonized Value-added Tax System Regulations No. 2 (Regulations).
2. We understand that the Company imports into, or acquires in Ontario, qualifying motor vehicles.
3. The specific vehicles in question are licensed under provincial laws (the specified province of Ontario), for the use on public highways, and the vehicles weigh less than 3,000 kilograms when fully fuelled and lubricated when first licensed.
4. The vehicles in question are brand new, and may be acquired from […], inside and outside of Canada.
5. The following scenarios have been provided with respect to the use of the vehicles in question in Ontario:
[…][Scenario 1]
[…][Scenario 2]
[…][Scenario 3]
[…][Scenario 4]
RULING REQUESTED
You would like to know whether there is a requirement to recapture ITCs in respect of the qualifying motor vehicles that are used by the Company in Ontario.
INTERPRETATION GIVEN
Due to the limited information provided, we are unable to provide you with a ruling. However, we would like to provide you with the following general information.
Under subsection 236.01(2) of the ETA, and the Regulations, a large business is required to recapture all or part of the specified provincial input tax credits (RITCs) for the provincial part of the HST paid or payable on specified property or services. Section 30 of the Regulations sets out the prescribed times to report RITCs in respect of specified property or services, and section 31 sets out the prescribed manner to calculate the amounts to recapture. These amounts are determined under the various rules in section 31, and all amounts are calculated using the recapture rate applicable at the "specified time", as defined in section 26, in respect of the RITCs. The specified time is generally the date the HST first became payable, or was paid without having become payable.
Subsection 28(1) of the Regulations includes qualifying motor vehicles as specified property and services. A qualifying motor vehicle generally means a vehicle that:
- is a motor vehicle that is acquired, or brought into a specified province;
- is licensed or is required to be licensed, under applicable provincial laws for use on a public highway; and
- weighs, while carrying its maximum capacity of fuel, lubricant and coolant, less than 3,000 kilograms at the time when the vehicle is first licensed, or first required to be licensed under those laws.
Section 26 of the Regulations defines the term motor vehicle to mean
“a motorized vehicle designed for the transportation of individuals or of tangible personal property, but does not include
(a) a power-assisted bicycle;
(b) a snow vehicle:
(c) an all-terrain vehicle;
(c) an electrically propelled wheelchair;
(d) a street car;
(e) a vehicle that runs only on rails; or
(f) a farm tractor, or other farm machinery, acquired, or brought into a province, exclusively for use in farming activities.
Subsection 28(2) of the Regulations lists exclusions to prescribed specified property or services. Specifically, under subparagraph 28(2)(g)(i), property or services are not specified property or services, and are not subject to recapture, when acquired in, or brought into, a specified province exclusively for the purpose of being supplied by a person.
Section 32 of the Regulations stipulates that if a qualifying motor vehicle is acquired in, or brought into a specified province, by a person that is in the business of supplying motor vehicles and the vehicle is used by the person, at any time during the fiscal year, otherwise than exclusively for the purpose referred to in subparagraph 28(2)(g)(i) of the Regulations, the amount of RITCs to be reported is calculated by the formula set out
In […][Scenario 4], the vehicles which are not acquired for the purpose of supply, would not be excluded from being specified property by subparagraph 28(2)(g)(i). There would be a requirement to recapture ITCs in respect of the […][Scenario 4] vehicles as described, in determining the net tax of the appropriate reporting period.
Additional information would be required to determine whether there would be a requirement to recapture of ITCs under section 32 of the Regulations in the other three scenarios.
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the interpretation(s) given in this letter, including any additional information, is not a ruling and does not bind the Canada Revenue Agency (CRA) with respect to a particular situation. Future changes to the ETA, regulations, or the CRA’s interpretative policy could affect the interpretation(s) or the additional information provided herein.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 905-721-5081. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Yours truly,
Peter Pushkarna
Basic Groceries & Recaptured Input Tax Credits Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
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