5 April 2005 GST/HST Interpretation 57021 - Documentary Requirements and Basic Tax Content

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.

Dear XXXXX:

Thank you for your letter XXXXX (with attachments) concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to your client's operations.

Interpretation Requested

1. What documentation is required by a registrant who is eligible to claim an input tax credit (ITC) (if there is an increase in commercial use) based on the basic tax content (BTC) of the property at the time of a change-in-use of capital property, when the property was originally acquired beyond the normal six year record retention period?

For example, would a schedule that provides a summary of the ITC originally claimed on the acquisition of capital property (for which original source documents are no longer available) be sufficient for this purpose?

2. Would the documentation required depend on the type of registrant (e.g., public service body vs. for-profit corporation) because of the different reporting requirements for income tax purposes (e.g., capital cost allowance calculations)?

Interpretation Given

Subsection 286(1) of the Excise Tax Act (ETA) stipulates that persons carrying on a business or that are engaged in a commercial activity, persons who are required to file a GST/HST return, and persons who make an application for a rebate are required to keep records and books of account. Subsection 286(3) of the ETA provides that every person who is required to keep records shall retain them for a specified period of time. Records must be retained until the expiration of six years after the end of the year to which they relate or for such other period as may be prescribed. To date there are no regulations under the ETA prescribing retention periods.

The minimum retention period for the records referred to in subsection 286(3) of the ETA is generally determined by the last year when a record may be required for purposes of the ETA, and not the year when the transaction occurred and the record was created. For example, records supporting the acquisition and capital cost of property held by a person (including public service bodies) should be maintained until the day that is six years from the end of the last year in which such an acquisition could enter into any calculation for GST/HST purposes, including the calculation of the BTC.

Therefore, in those situations where as a result of a change in use of capital property there has been an increase in use of capital property in commercial activity entitling a registrant to claim additional ITC's, the calculation of the additional ITC must be supported by adequate documentation and must be retained for a period of six years from the end of the reporting period in which the additional ITC was claimed.

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the Excise Tax Act, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST/HST Memoranda Series, do not bind the Canada Revenue Agency with respect to a particular situation.

For your convenience, find enclosed a copy of section 1.4 of Chapter 1 of the GST/HST Memoranda Series.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-0419.

Yours truly,

Catherine Séguin-Ouimet
General Operations Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate

2005/04/01 — RITS 58154 — Fair Market Value and Self-supply on New Residential Rental Property