Section 199

Subsection 199(3)

Administrative Policy

15 September 2017 Interpretation 169313

ITC determination where motor vehicle that is not a passenger vehicle (e.g., taxi) commences to be used 10% to 90% in commercial use

An individual, while registered for GST/HST purposes, acquires a vehicle exclusively for personal use. Subsequently, the individual commences to use the vehicle as capital property in commercial activities. Is the registrant is entitled to an ITC, and how is it computed?

After noting that “if the vehicle in question is a motor vehicle, the capital rules apply, and if the vehicle is a passenger vehicle, the passenger vehicle rules apply,” CRA noted that, in the former scenario:

Pursuant to subsection 199(3), where a registrant owns a motor vehicle not used primarily in commercial activities and increases its use to primarily in commercial activities, the registrant is deemed to have acquired the property for use as capital property exclusively in commercial activities immediately before that time. The registrant is deemed to have received, at the particular time, a supply of the property by way of sale, and except where the supply is an exempt supply, to have paid, at the particular time, tax in respect of the supply equal to the basic tax content (BTC) of the property at the particular time. …


An individual registrant that had a passenger vehicle that was used for personal use, will now be used 100% as a taxi. Note that a passenger vehicle is an automobile. An automobile does not include a taxi, but a taxi is a motor vehicle.

Since a taxi is a motor vehicle, we would follow the capital property rules, Meaning, the registrant would have to use the vehicle more than 50% in its commercial activities in order to be eligible to claim an ITC. In this scenario, the individual is using the vehicle 100% in commercial activity, therefore the registrant would be entitled to an ITC at the FMV (provided the amount is the lesser than the original cost of the vehicle) subject to the limitations of subsection 225(4) of the ETA.

Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 202 - Subsection 202(4) ITC determination where passenger vehicle commences to be used 10% to 90% in commercial use 264