Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.
XXXXX
XXXXX
XXXXX
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
Case Number: 120360
Attention: XXXXX XXXXX
April 28, 2010
Dear Sir:
Subject:
GST/HST INTERPRETATION
Claiming an input tax credit (ITC) on taxes paid on XXXXX
Thank you for your letter of XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) in relation to the claiming of an ITC for taxes paid on XXXXX for resale that were subsequently stolen.
It is our understanding that you are representing the company XXXXX (the client). It is registered for GST/HST purposes with Business Number XXXXX.
The client operates a store located at XXXXX. XXXXX, XXXXX on which the client had paid the applicable GST and XXXXX provincial taxes in the amount of $XXXXX, were stolen. The XXXXX were bought for resale in the course of the commercial activities of the client.
The robbery was reported to the local police and to the insurance company. The insurance company has indicated that it will not compensate the client for the taxes including the GST paid on the purchase of the XXXXX that were subsequently stolen.
Interpretation Requested
The client is entitled to recover the taxes paid on the XXXXX lost in the robbery and requests that the local tax services office be advised to provide a credit or an adjustment to the client on the client's next remittance of GST/HST.
Interpretation Given
Based on the information above, we provide the following interpretation:
The client is entitled to claim an ITC for the amount of GST paid on the purchase of the XXXXX for resale that were subsequently stolen from the client's store.
As stated above, the client has paid the GST when he purchased the XXXXX that were subsequently stolen. Under subsection 169(1) of the Excise Tax Act (ETA), the client is entitled to claim an ITC for the amount of the GST that was paid, if all the conditions for such a claim are met. The conditions are:
• the property or service must be acquired, imported or brought into a participating province by a person for consumption, use or supply in the course of the person's commercial activities;
• the person must be a registrant during the reporting period in which the GST on the property or services becomes payable by the person or is paid without having become payable;
• the person must have obtained sufficient documentary evidence to substantiate the ITC prior to making the claim in a GST return;
• tax must be payable by the person in respect of the supply, importation or bringing in, or be properly paid by the person prior to its becoming payable; and
• the ITC must be claimed in a return filed within the time limit for claiming the ITC.Insurance claims are sometimes settled in the form of a cash settlement that is made once the amount of the loss has been determined. You indicated that the insurance company will not compensate the client for the taxes paid by the client.
Under the principle of indemnity, an insurer is generally required to make payment in respect of an insurance claim only to the extent of the actual loss suffered by the insured in accordance with the terms of the insurance policy. The net-of-GST/HST method for settling property and casualty insurance claims ensures adherence to the principle of indemnity in the settlement of insurance claims under the GST/HST. That method provides that the amount paid by an insurer to indemnify an insured will be reduced by the amount that the insured is eligible to claim as an ITC and/or rebate related to the tax portion of the cost of repairing or replacing the damaged property or stolen goods.
Where an insured is eligible to claim an ITC that is related to the GST portion of the repair or replacement expense, the amount paid by the insurer to indemnify the insured will not include the amount for which the insured is entitled to claim an ITC in respect of that expense. The allowable ITC, in that case, is not considered a loss to the insured.
You have made reference to the applicable GST and XXXXX provincial taxes, for a total amount of $XXXXX, that the client paid when he purchased the XXXXX. Under the provisions of subsection 169(1) of the Excise Tax Act (ETA), the client is entitled to claim an ITC for the amount of GST that was paid, if all the conditions for such a claim are met. There are no provisions in the ETA for refund of other taxes paid on the purchase.
When the client purchased the XXXXX, the client was the recipient of the supply since the client was liable to pay the consideration for the supply. Subsection 169(4) of the ETA provides that the recipient of the supply may claim an ITC once the recipient has obtained sufficient evidence as will enable the amount of input tax credit to be determined. The allowable ITCs may be calculated on the basis of the supplier's invoice and the proof of loss that was submitted to the insurance company.
The client is eligible to claim an ITC in respect of the GST to the extent that the XXXXX were acquired, imported or brought into a participating province for consumption, use or supply in the course of the client's commercial activities. The client has up to four years from the reporting period in which the original entitlement arose to claim an ITC.
If the client believes that all the conditions to claim the input tax credits are met, the client may claim that amount on his next GST/HST return. We cannot make a request on behalf of the client to have this adjustment made to the client's GST/HST return. The responsibility for claiming the ITCs rests with the registrant who must ensure that the documentary requirements for claiming the ITCs are met, as set out in subsections 169(4) and 223(2) of the Excise Tax Act, and in the Input Tax Credit Information (GST/HST) Regulations.
Questions concerning a refund of the XXXXX provincial tax on products stolen from the client's store should be directed to XXXXX Finance, Revenue Division, XXXXX. The telephone numbers are 1-800-XXXXX, extension XXXXX (toll free) or XXXXX. The e-mail address is XXXXX and the facsimile number is XXXXX.
The foregoing comments represent our general views with respect to the subject matter of your request. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, do not bind the Canada Revenue Agency with respect to a particular situation. Future changes to the ETA, regulations, or our interpretative policy could affect this interpretation.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-0419. 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,
Joseph Mathieu
General Operations Unit
GST/HST Rulings Directorate Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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