Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Dear Sirs:
This is in reply to your letter of March 18, 1991, wherein you requested our comments regarding section 67.1(1) of the Income Tax Act (the "Act") and the implications of the Goods and Services Tax (the "GST").
Section 236 of the GST parallels section 67.1 of Act and is intended to limit the input tax credit that may be claimed in respect of the consideration payable for food, beverages or entertainment. Thus, only 80% of the GST qualifies for the input tax credit and only 80% of the 20% non-recoverable GST is deductible for income tax purposes.
To simplify accounting, however, the full input tax credit may be claimed on meal and entertainment expenses throughout the fiscal year. At the end of the year, 20% of the total input tax credits claimed for meal and entertainment expenses is recaptured under section 236 of the GST. This is done by adding the 20% recapture to net tax for the last reporting period in the year in the case of annual filers or in any other case the recapture is added to net tax in the return for the first reporting period after that year. This enables GST registrants to calculate the input tax credit recapture at essentially the same time as they would normally calculate their meal and entertainment expense deductions for income tax purposes. The Example below illustrates this method.
Cost of Meal $10.00GST applicable .70Total Meal Cost $10.70Less:GST input tax credit (.70 x 80%) .56 $10.14Amount not deductible as an expense pursuant to restrictions of Subsection 67.1(1)of the Act (20% x 10.14) $2.03Allowable net expense for income tax purposes $8.11
We trust our comments are of assistance
Yours truly,
for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch
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© Her Majesty the Queen in Right of Canada, 1991
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© Sa Majesté la Reine du Chef du Canada, 1991
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