Calculate input tax credits - ITC eligibility percentage
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Calculate input tax credits – ITC eligibility percentage
Overview
Determine the types of purchases and expenses
Determine the percentage of use in commercial activities
Determine the ITC eligibility percentage
Choose a method to calculate ITCs
Determine the ITC eligibility percentage
Determine the ITC eligibility percentage (does not include reimbursements or allowances)
The following sections provide details on the ITC eligibility percentage for different type of expenses:
Note
Most charities are limited in the ITCs that they can claim because of the net tax calculation for charities. However, the rules outlined in this section apply if the charity has elected not to use the net tax calculation method.
Operating expenses
The following charts identify the different percentages of the amount of GST/HST paid or payable you can claim as an ITC on most operating expenses that relate to your commercial activities. However, there are restrictions on the amount that you can claim as an ITC on certain expenses. For more information, see the following charts:
- ITC eligibility on operating expenses (other than meals and entertainment)
- ITC eligibility on meals and entertainment expenses
- ITC eligibility on club memberships
- ITC eligibility on expenses charged to procurement and corporate credit card
ITC eligibility on operating expenses (other than meals and entertainment)
|
Percentage of use in commercial activities |
ITC eligibility for most businesses (including charities that have elected not to use the net tax calculation) |
ITC eligibility for financial institutions Footnote 1 |
|---|---|---|
| 90% or more | 100% | % of use |
| More than 10% and less than 90% | % of use | % of use |
| 10% or less | No ITCs | % of use |
If you have both commercial activities and non-commercial activities (such as exempt supplies), and at least 90% of an operating expense cannot reasonably be allocated to either your commercial or your non-commercial activities, you apportion the GST/HST paid or payable for the property or service between these two activities for ITC purposes. You can generally claim ITCs only for the part of the GST/HST paid or payable for the property or service that relates to the consumption or use in your commercial activities.
Example - Apportion of commercial activities and non-commercial activities
You own a building in Nova Scotia where you operate your retail store (a commercial activity), and you rent an apartment on the upper floor to a residential tenant on a long-term basis (an exempt activity). The rent includes utilities. Your utility bill for the building that is used for both commercial and exempt activities includes $80 HST. If all other conditions for claiming an ITC are met and you use a fair and reasonable allocation method to determine that 70% of the utility bill relates to the store and 30% to the apartment, you can claim an ITC for 70% of the HST you pay on your utility bill:
$80 (HST) × 70% = $56 (ITC)
Example – Apportion of commercial activities and non-commercial activities
You own a building in Nova Scotia where you operate your retail store (a commercial activity), and you rent an apartment on the upper floor to a residential tenant on a long-term basis (an exempt activity). The rent includes utilities. Your utility bill for the building that is used for both commercial and exempt activities includes $80 HST. If all other conditions for claiming an ITC are met and you use a fair and reasonable allocation method to determine that 70% of the utility bill relates to the store and 30% to the apartment, you can claim an ITC for 70% of the HST you pay on your utility bill:
$80 (HST) × 70% = $56 (ITC)
The method you use to determine the percentage that an operating expense is used in your commercial activities has to be fair and reasonable, and used consistently throughout the year.
- Footnote 1
-
Financial institutions must use 100% of an expense in commercial activities before they can claim a full ITC. However, they can claim a partial ITC even when they use less than 10% of an expense in commercial activities. The ITC rules that apply to financial institutions are explained in GST/HST Technical Information Bulletin B-098, Application of Section 141.02 to Financial Institutions That Are Qualifying Institutions, GST/HST Technical Information Bulletin B-099, Application of section 141.02 to Financial Institution That Are Not Qualifying Institutions and GST/HST Technical Information Bulletin B-106, Input Tax Credit Allocation Methods for Financial Institution for Purposes of Section 141.02 of the Excise Tax Act.
ITC eligibility on meals and entertainment expenses
The following chart identifies the different percentages of the amount of GST/HST paid that you can claim as an ITC on reasonable meals and entertainment expenses that relate to your commercial activities.
| ITC eligibility for most businesses | ITC eligibility for charities and public institutions | Long-haul truck drivers |
|---|---|---|
| 50% | 100% | 80% |
ITC eligibility on club memberships
You are not eligible to claim an ITC in respect of the GST/HST paid or payable on a membership, or on a right to acquire a membership, in a club the main purpose of which is to provide dining, recreational or sporting facilities. However, you can claim an ITC if the membership or right is acquired by you exclusively for supply in the ordinary course of your business of selling such memberships or rights.
For more information, see GST/HST Memorandum 8.2, General Restrictions and Limitations.
| Examples | Then |
|---|---|
| A GST/HST registrant purchases memberships to a tennis club for $10,000 plus $500 GST. The memberships are acquired exclusively for purposes of selling them to clients in the ordinary course of the registrant's business of selling such memberships. | The GST/HST registrant is entitled to claim an ITC of $500, provided all other ITC requirements are satisfied. |
| A GST/HST registrant purchases a golf club membership. | The GST/HST registrant is not eligible to claim an ITC with respect to the GST/HST paid on this membership. |
ITC eligibility on expenses charged to procurement and corporate credit card
The statements and reports provided by the procurement card or corporate credit card issuers might not provide enough information about your purchases to support your claim for ITCs.
In cases where the documentary requirements are not satisfied, ITC cannot be claimed until the GST/HST registrant obtains additional supporting documentation to establish the particulars of the purchases, or obtains an exemption from the documentary requirements.
The CRA will permit GST/HST registrants to use factors for calculating ITCs on expenses charged to procurement cards and corporate credit cards provided they satisfy certain conditions.
For more information on expenses charged to procurement cards, see NOTICE199, Procurement cards – Documentary Requirements for Claiming Input Tax Credits.
For more information on expenses charged to corporate credit cards, see GST/HST Policy Statement P-184, Credit Card Expenses and the Registrant’s Use of Factors for Claiming Input Tax Credits.
Capital personal property expenses
The following charts identify the different percentages of the amount of GST/HST paid or payable you can claim as an ITC on most capital personal property that relate to your commercial activities. The type of vehicle you purchase can affect the calculation to claim your ITCs. For more information, see the following charts:
- ITC eligibility on capital personal property (other than passenger vehicles and aircraft)
- ITC eligibility on capital personal property of passenger vehicles and aircraft
ITC eligibility on capital personal property (other than passenger vehicles and aircraft)
|
Percentage of use in commercial activities |
ITC eligibility for most businesses (including charities that have elected not to use the net tax calculation) |
ITC eligibility for financial institutions Footnote 32C |
|---|---|---|
| More than 50% | 100% | % of use |
| 50% or less | No ITCs | % of use |
ITC eligibility on capital personal property of passenger vehicles and aircraft
|
Percentage of use in commercial activities |
ITC eligibility for corporations Footnote 2A and public service bodies | ITC eligibility for partnerships and sole proprietorship (including charities that have elected not to use the net tax calculation) | ITC eligibility for financial institutions Footnote 2C |
|---|---|---|---|
| 90% or more | 100% | 100% | % of use |
| More than 50% and less than 90% | 100% | Fraction X CCA Footnote 2B | % of use |
| More than 10% and less than 50% | No ITCs | Fraction X CCA Footnote 2B | % of use |
| 10% or less | No ITCs | No ITCs | % of use |
- Footnote 2a
-
You cannot claim an ITC for the portion of:
- the purchase price over $30,000 for a passenger vehicle
- if you are renting the passenger vehicle, the limit is $800 per month
- Footnote 2b
-
If you use the vehicle or aircraft in both commercial and non-commercial activities, only the part of the CCA attributable to the commercial activities can be used to calculate your ITCs. To determine the percentage of commercial use, see Automobile Benefits Online Calculator. You usually calculate your CCA (class 10.1) for income tax purposes at the end of your fiscal year.
You determine your ITC annually using the following calculations:
- CCA X 5/105 if you paid 5% GST
- CCA X 12/112 if you paid 12% HST
- CCA X 13/113 if you paid 13% HST
- CCA X 14/114 if you paid 14% HST
- CCA X 15/115 if you paid 15% HST
If you paid the provincial part of the HST for a vehicle or aircraft after you brought it into a participating province from another participating province with a lower HST rate.
For tax years ending on or after July 1, 2016:
- CCA x 1/101, into Nova Scotia, New Brunswick, or Newfoundland and Labrador from Prince Edward Island
- CCA x 1/101, into Prince Edward Island from Ontario
- CCA x 2/102, into Nova Scotia, New Brunswick, or Newfoundland and Labrador from Ontario
For tax years ending during the period from April 1, 2013 to June 30, 2016:
- CCA x 1/101, into Nova Scotia from Prince Edward Island
- CCA x 1/101, into Prince Edward Island from New Brunswick, Newfoundland and Labrador, or Ontario
- CCA x 2/102, into Nova Scotia from Ontario, New Brunswick, or Newfoundland and Labrador
For tax year ending during the period from July 1, 2010 to March 31, 2013:
- CCA x 1/101, into New Brunswick, Newfoundland and Labrador, or Ontario from British Columbia
- CCA x 2/102, into Nova Scotia from New Brunswick, Newfoundland and Labrador, or Ontario
- CCA x 3/103, into Nova Scotia from British Columbia
If you paid the provincial part of the HST for a vehicle or aircraft after you brought it into a participating province from a non-participating province or imported it into Canada for business purposes
For tax years ending on or after July 1, 2016:
- CCA x 8/108, if you paid 13% HST in Ontario
- CCA x 9/109, if you paid 14% HST in Prince Edward Island
- CCA x 10/110, if you paid 15% HST in Nova Scotia, New Brunswick, or Newfoundland and Labrador
For tax years ending during the period from April 1, 2013 to June 30, 2016:
- CCA x 8/108, if you paid 13% HST in New Brunswick, Newfoundland and Labrador, or Ontario
- CCA x 9/109, if you paid 14% HST in Prince Edward Island
- CCA x 10/110, if you paid 15% HST in Nova Scotia
For tax years ending during the period from July 1, 2010 to March 31, 2013:
- CCA x 7/107, if you paid 12% HST in British Columbia
- CCA x 8/108, if you paid 13% HST in New Brunswick, Newfoundland and Labrador, or Ontario
- CCA x 10/110, if you paid 15% HST in Nova Scotia
- Footnote 2c
-
Financial institutions must use 100% of an expense in commercial activities before they can claim a full ITC. However, they can claim a partial ITC even when they use less than 10% of an expense in commercial activities. The ITC rules that apply to financial institutions are explained in GST/HST Technical Information Bulletin B-098, Application of Section 141.02 to Financial Institutions That Are Qualifying Institutions, GST/HST Technical Information Bulletin B-099, Application of section 141.02 to Financial Institution That Are Not Qualifying Institutions and GST/HST Technical Information Bulletin B-106, Input Tax Credit Allocation Methods for Financial Institution for Purposes of Section 141.02 of the Excise Tax Act.
Capital real property expenses
The following chart identifies the different percentages of the amount of GST/HST paid or payable you can claim as an ITC on most capital real property that relate to your commercial activities.
|
Percentage of use in commercial activities |
ITC eligibility for individuals, corporations and partnerships | ITC eligibility for public service bodies Footnote 3B (including charities that have elected not to use the net tax calculation) | ITC eligibility for Financial institutionsFootnote 3C |
|---|---|---|---|
| 90% or more | 100% | 100% | % of use |
| More than 50% and less than 90% | % of use | 100% | % of use |
| More than 10% and less than 50% | % of use Footnote 3A | No ITCs | % of use |
| 10% or less | No ITCs | No ITCs | % of use |
- Footnote 3a
-
Individuals cannot claim an ITC if the property is used more than 50% for their personal use or that of a related individual, either individually or in combination.
- Footnote 3b
-
Where a PSB is determining ITCs for real property for which it has not made an election. If the PSB has made the election, see the column for partnerships and corporations. To make the election use Form GST26, Election or Revocation of an Election by a Public Service Body to Have an Exempt Supply of Real Property Treated as a Taxable Supply.
- Footnote 3c
-
Financial institutions must use 100% of an expense in commercial activities before they can claim a full ITC. However, they can claim a partial ITC even when they use less than 10% of an expense in commercial activities. The ITC rules that apply to financial institutions are explained in GST/HST Technical Information Bulletin B-098, Application of Section 141.02 to Financial Institutions That Are Qualifying Institutions, GST/HST Technical Information Bulletin B-099, Application of section 141.02 to Financial Institution That Are Not Qualifying Institutions and GST/HST Technical Information Bulletin B-106, Input Tax Credit Allocation Methods for Financial Institution for Purposes of Section 141.02 of the Excise Tax Act.
Determine the ITC eligibility percentage for reimbursements or allowances to an employee, partner, or volunteer
You may be eligible to claim an ITC in respect of an amount reimbursed or an allowance paid to employees, partners, or volunteers for the acquisition of property or services for use related to your commercial activities.
- food, beverages, and entertainment
- parking
- supplies
- union, professional, or similar dues
- motor vehicle expenses (for example, fuel, maintenance and minor repairs, insurance, license, registration)
- work space in home (for example, electricity, heat, water, maintenance)
Where an allowance or a reimbursement is paid for a qualifying item that is subject to the point-of-sale rebate for the provincial part of the HST, no ITC may be claimed for the provincial part of the HST that has been rebated.
ITC eligibility on reimbursements
You can generally claim ITCs for the GST/HST included in reimbursements you pay to your employees or the partners in your partnership for expenses they incurred in Canada on your behalf for your commercial activities.
If you are a charity or public institution, you may also be able to claim ITCs for the GST/HST included in reimbursements you pay to your volunteers for expenses incurred on your behalf that relate to your commercial activities.
For more information, see GST/HST Memorandum 9.4, Reimbursements.
ITC eligibility on allowances
Generally, you are considered to have paid the GST/HST on a reasonable allowance you pay to your employees or partners (or volunteers if you are a charity or a public institution) if you meet all of the following conditions:
- the allowance is used to pay GST/HST taxable (other than zero-rated) expenses and at least 90% of the expenses are incurred in Canada, or the allowance is for the use of a motor vehicle in Canada
- the allowance is or would be deductible for income tax purposes
- the expenses incurred by your employees, partners, or volunteers would have been eligible for ITCs if you had incurred them
For more information, see GST/HST Memorandum 9.3, Allowances.
- Date modified:
- 2019-04-15