Input tax credits
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Input tax credits
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Overview
As a GST/HST registrant, you recover the GST/HST paid or payable on your purchases and expenses related to your commercial activities by claiming input tax credits (ITCs) on line 106.
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.
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
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
You can claim an ITC for the HST you pay when you buy property or a service in a participating province to use in your commercial activities, even if your business is not located in a participating province.
If you are a new registrant, you may be able to claim an ITC for the GST/HST paid or payable on property such as capital property and inventory that you have on hand on the day you register. For more information, see New registrants.
To claim an ITC, the expense or purchase must be reasonable in quality, nature, and cost in relation to the nature of your business.
Note
Selected listed financial institutions cannot generally claim an ITC for the provincial part of the HST because of the special calculation method called the “special attribution method” that they must use when calculating their net tax. For more information, see Guide RC4050, GST/HST Information for Selected Listed Financial Institutions.
Informing your non-resident suppliers registered under the simplified GST/HST framework of your registration status
Under the new GST/HST measures for supplies of cross-border digital products and services, as well as platform-based short-term accommodation, non-resident suppliers, including digital platform operators, may be required to register under a simplified GST/HST framework and collect the GST/HST in respect of those supplies. If you are purchasing products or services from suppliers registered under the simplified GST/HST framework, and you are registered under the normal GST/HST rules, you must provide proof of registration to these suppliers to ensure they do not charge GST/HST on such supplies. Failing to provide this information may result in difficulties in recovering the GST/HST you paid on those supplies since the GST/HST paid cannot be claimed as an ITC or a rebate.
For more detailed information on recovering the GST/HST paid on supplies acquired from suppliers registered under the simplified registration regime, please consult GST/HST Notice 322.
Find out if you are eligible to claim ITCs
You may be eligible to claim ITCs if all of the following apply:
- You acquired, imported or brought into a participating province property or a service 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 a service.
- GST/HST must have been paid or payable by you in respect of the supply, importation, or bringing in of the property or service.
- You obtain sufficient documentary evidence to substantiate the ITC prior to making the claim in a GST/HST return. For more information, see Records you need to support your claim.
- You claim the ITC in a GST/HST return filed within the time limit. For more information, see Time limits 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.
If you use the special quick method of accounting for public service bodies, you cannot claim ITCs on most of your purchases and expenses. However, you may be eligible to claim ITCs for certain purchases such as purchases of real property and improvements to real property. For more information, see Special quick method of accounting for public service bodies.
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 fill out their GST/HST returns. For more information, see How to calculate your net tax if you are a charity
New registrants
If you are a new registrant, and you were a small supplier immediately before you became a registrant, you are considered to have received a supply by way of sale of property that was held immediately before you became a registrant for consumption, use, or supply in the course of commercial activities. The CRA considers that you bought the property at that time and paid GST/HST equal to the basic tax content of the property. This may apply to capital property, real property, and inventory that you had on hand to use in your commercial activities at the time you became a registrant. You may be eligible to claim ITCs for the GST/HST paid or payable on these supplies.
You can also claim an ITC for any GST/HST that was payable before you became a registrant in respect of services to be supplied to you after you became a registrant, or that 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 service or 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 - If you are a new registrant
You prepaid three months of rent for office space for use in your commercial activities for the period of 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.
Example - If you are a new registrant
You prepaid three months of rent for office space for use in your commercial activities for the period of January, 1, 2023 to March 31, 2023. If you became a registrant on March 1, 2023, 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, 2023 because that amount relates to the period before you became a registrant.
How to calculate ITCs
Generally, if you have an eligible expense that you intend to use only in your commercial activities, you can claim an ITC for the full amount of the GST/HST you paid. In certain situations there are restrictions on the amount that you can claim as an ITC. These restrictions depend on the type and nature of the expense. For more information on how to calculate ITCs for different types of expenses, see Calculate input tax credits.
How to claim ITCs
Once you have calculated the amount you can claim, report it on line 106.
When Prince Edward Island harmonized the provincial sales tax with the GST to implement the HST, a temporary measure was put in place which requires large businesses to recapture (repay) all or part of their ITCs for the provincial part of the HST paid or payable on specified property and services. The recapture of ITCs in Prince Edward Island has been phased out over the period of April 1, 2018, through March 31, 2021. Generally, you would be a large business during a given recapture period if the total revenue from your annual taxable supplies, and the taxable supplies of associated persons, 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 more information on the recapture of ITCs, see GST/HST Info Sheets GI-165, Prince Edward Island: Transition to the Harmonized Sales Tax – Builders and Recaptured Input Tax Credits.
Time limits for claiming ITCs
In general, registrants claim their ITCs when they file their GST/HST return for the reporting period in which they made their purchases. However, they may have ITCs that they did not claim when they filed the return for the corresponding reporting period. If so, they can claim those previously unclaimed ITCs on a future GST/HST return. For most registrants, 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 ITCs could have first been claimed.
The time limit for claiming ITCs is reduced to two years for:
- listed financial institutions (other than corporations that are deemed to be a financial institution because they have elected to have certain taxable supplies deemed to be financial services)
- persons whose threshold amounts exceed $6 million for both the person’s fiscal year that includes the reporting period and the person’s preceding fiscal year, except for:
- charities
- 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 that includes the reporting period in which the ITCs could have first been claimed.
| Types of business | Conditions | Time limits | The latest you can send your GST/HST return to claim your ITC |
|---|---|---|---|
|
Most registrants |
You do not meet any of the conditions for the two year time limit listed under: |
Four years |
The due date of the return for the last reporting period of the person that ends within four years after the end of the reporting period in which the ITC first became available. |
| Charities | Four years |
The due date of the return for the last reporting period of the person that ends within four years after the end of the reporting period in which the ITC first became available. |
|
|
Business with threshold amount more than $6 million |
You are not a charity AND Both of the following apply:
|
Two years |
The due date of the return for the last reporting period of the person that ends within two years after the end of the person’s fiscal year that includes the reporting period in which the ITC first became available. |
|
Listed financial institution |
You are not a deemed financial institution (see the conditions for "Deemed financial institution"). |
Two years |
The due date of the return for the last reporting period of the person that ends within two years after the end of the person’s fiscal year that includes the reporting period in which the ITC first became available. |
|
Deemed financial institution |
The CRA considers you to be a financial institution because of your election to deem certain supplies to be exempt financial services.Footnote2 |
Four years |
The due date of the return for the last reporting period of the person that ends within four years after the end of the reporting period in which the ITC first became available. |
- Footnote 1
-
Based on revenue from your taxable supplies and those of your associates in your immediately preceding fiscal year. It includes most zero-rated supplies, but does not include revenue from:
- supplies made outside Canada
- zero-rated exports of property and services
- zero-rated supplies of financial services
- exempt supplies
- taxable sales of capital real property
- goodwill
- Footnote 2
-
This election is made by using Form GST27 or Form RC7227. For more information on this election, see GST/HST Memorandum 17-14, Election to Deem Supplies to be Financial Services and Related Election for Selected Listed Financial Institutions.
Example 1 - Most businesses
You are a quarterly filer and you buy office furniture in the reporting period October 1, 2022, to December 31, 2022, for which you can claim an ITC. The due date of the return for this reporting period is January 31, 2023.
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, 2026 to December 31, 2026. The due date for this return is January 31, 2027. This means that you can claim the ITC in any return due and filed by January 31, 2027.
Example 2 - Most listed financial institutions and certain businesses with threshold amounts of more than $6 million
You are a monthly filer with a fiscal year-end of December 31. You buy goods in the reporting period September 1 to 30, 2022, for which you can claim an ITC. The fiscal year that includes the September 2022 return ends on December 31, 2022. You can claim the ITC on any later return for a reporting period that ends by December 31, 2024 and is filed by January 31, 2025.
Records you need to support your claim
Suppliers have to provide specific information on the invoices, receipts, contracts, or other business papers that they use when they supply taxable property and services to a GST/HST registrant purchaser. The purchaser needs this information to support their claims for ITCs or rebates for the GST/HST they were charged. In certain situations, the documentation requirements have been reduced. For more information, see Exceptions to the documentary requirements.
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, invoices, or other documentation to support your claim:
| Information required | Total sale under $30 | Total sale of $30 to $149.99 | Total sale of $150 or more |
|---|---|---|---|
| Supplier's business or trading name, or an intermediary's Footnote * | Yes | Yes | Yes |
| The invoice date or, if no invoice issued, the date on which the GST/HST is paid or payable | Yes | Yes | Yes |
| The 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 the status of each supply where the invoice includes both taxable and exempt supplies | No | Yes | Yes |
| The supplier or intermediary's GST/HST registration number | No | Yes | Yes |
| The buyer's name or trading name or the name of the buyer's authorized agent or representative | No | No | Yes |
| A brief description of the property or services | No | No | Yes |
| The terms of payment | No | No | Yes |
- Footnote *
-
An intermediary is a registrant who, acting as your agent or under an agreement with you, causes or facilitates the making of the supply by you.
Notes
Under proposed changes, as of April 20, 2021, an intermediary also includes a billing agent that is deemed to have acted as your agent in making the supply.
Under proposed changes, as of April 20, 2021, the input tax credit information thresholds will be increased to $100 (from $30) and $500 (from $150).
Exceptions to the documentary requirements
In certain situations, the documentation requirements have been reduced.
For allowances or reimbursement of expenses (where a factor approach for reimbursements is used) paid 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 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 GST/HST registration number
- the reporting period in which 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
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 GST/HST registration number
- 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
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
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 Notice 199, Procurement cards - Documentary Requirements for Claiming Input Tax Credits.
For taxi, limousine, and commercial ride-sharing 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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- Date modified:
- 2024-09-09