How to Claim GST/HST Input Tax Credits in Canada

The short answer

An input tax credit lets a GST/HST registrant recover the GST/HST paid on business purchases, but only when five conditions all hold. You must be registered in the period the tax became payable, the purchase must be for your commercial activities, you must have the supporting document in hand before you claim, the tax must have been payable or properly paid, and the claim must be made inside the time limit. Miss any one of those, and the credit is not claimable on that return, even if the purchase was plainly for the business. Most of the work is therefore paperwork discipline: keep the invoice, check the supplier number where the rules require it, and claim the credit on a return inside four years rather than letting old receipts pile up.

This guide covers the process only. It is not advice about whether a particular purchase of yours qualifies. Where a purchase sits near a boundary, such as a vehicle, a home office, or a mixed personal and business expense, the CRA memoranda and a ruling request are the routes to certainty, not a general guide.

Step 1: Confirm you are a registrant for the period

Input tax credits belong to registrants. The CRA states the test plainly in GST/HST Memorandum 8.1: the person must be a registrant during the reporting period in which the GST/HST on the property or service becomes payable, or is paid without having become payable. Registration that starts later does not retroactively make earlier purchases claimable in the ordinary way, and a person who has stopped being a registrant cannot keep claiming credits for later purchases.

Check your registration effective date in My Business Account before you assume a purchase qualifies. If you registered voluntarily below the $30,000 small-supplier threshold, you became eligible to claim credits from the effective date of registration, subject to the other conditions. If you were required to register because taxable supplies crossed $30,000 over four consecutive calendar quarters, the effective date the CRA assigned is the date that matters, not the date you noticed the threshold had passed.

Step 2: Test the purchase against commercial activity

The property or service must be acquired, imported, or brought into a participating province for consumption, use, or supply in the course of your commercial activities, and the credit is available only to the extent of that use. Commercial activity means a business carried on by the person, apart from the making of exempt supplies. That distinction does most of the work in practice. The amount claimed must also be reasonable in the circumstances, in quality, nature, and cost in relation to the business.

Purchases used to make exempt supplies do not generate input tax credits to the extent of the exempt use. A registrant who makes both taxable and exempt supplies apportions. A purchase used entirely for personal purposes generates no credit at all. The CRA's GST/HST Memorandum 8.2 is explicit that property or services acquired exclusively for the personal consumption, use, or enjoyment of an employee, officer, or their relatives are restricted, and that memberships in clubs whose main purpose is dining, recreational, or sporting facilities are restricted unless the membership is acquired exclusively for resale in the ordinary course of a business of selling such memberships.

Apply the apportionment test honestly and keep a note of how you worked it out. Where 90 percent or more of the consumption or use of a property or service is in the course of commercial activities, a registrant other than a financial institution may claim an ITC equal to 100 percent of the GST/HST paid or payable. Below that level, the claim follows the commercial-use portion, and the method you use must be fair and reasonable for the purchase. A vehicle, a phone, and a home office each need their own use record, because the same percentage rarely fits all three.

Step 3: Get the document before you claim

Before filing the return that claims the credit, you must obtain sufficient documentary evidence that lets the amount of the credit be determined. An invoice, receipt, credit card receipt, debit note, book or ledger entry, written contract, or computerized record can serve, provided it contains the prescribed information for the size of the purchase. The thresholds changed effective April 20, 2021, from $30 and $150 to $100 and $500 — the change is set out in the CRA's Excise and GST/HST News No. 118 — and older guides still quote the old figures. Use the current thresholds.

For a total amount paid or payable under $100, the supporting document must include the supplier or intermediary name or trading name, the date of the invoice or the date the tax was paid or payable, and the total amount paid or payable. For $100 to $499.99, it must also indicate the GST/HST charged or that the amount includes GST/HST at the applicable rate, indicate the status of each supply where taxable and exempt supplies appear together, and show the supplier GST/HST registration number. For $500 or more, it must also show your name or trading name, a brief description of the property or services, and the terms of payment.

If a document is missing the supplier registration number on a purchase of $100 or more, ask the supplier for a corrected document before you claim. The CRA can deny a claim that lacks the prescribed information, and reconstructing it months later, after a supplier has closed or changed systems, is the common reason credits are lost. Verify a supplier number with the CRA GST/HST Registry before you rely on it for a large purchase, and keep the registry result with the invoice.

Step 4: Claim the credit on the return, inside the time limit

Claim input tax credits in the total input tax credits calculation on your GST/HST return for the reporting period, or on a later return filed inside the time limit. A missed credit from an earlier period is not automatically lost: in most cases you can claim it on a later return, provided that later return is filed by the due date of the return for the last reporting period ending within four years after the end of the period in which the credit arose.

Specified persons have a shorter window. Generally, the four-year limit is reduced to two years for a specified person, which includes a listed financial institution and a person whose threshold amounts exceed $6 million for both the fiscal year that includes the reporting period and the previous fiscal year, with exceptions for charities and for persons whose supplies are all or substantially all taxable. The two years run from the end of the fiscal year that includes the reporting period in which the credit arose, not from the end of that reporting period. If your business is near that size, treat the two-year window as the working deadline and do not assume the general four-year rule applies.

Do not send receipts with an electronic return. The CRA does not ask for them at filing, but it can ask for them on review or audit, and the documents must already be in your records when the claim is made. Keep purchase invoices and receipts with your GST/HST records, which must be available to the CRA when it asks to see them, and keep them in a form that lets you find the document for a given return period without rebuilding the file.

Step 5: Apply the restrictions and the special cases

Several categories need a second look before the return is filed.

Meals and entertainment come first for most small businesses. You may claim input tax credits on food, beverages, and entertainment expenses incurred in the reporting period, but you must then make an adjustment to recapture 50 percent of the input tax credits previously claimed on those expenses — under GST/HST Memorandum 8.2, the recapture goes in the first reporting period after the end of the fiscal year in which the expenses were incurred. Claiming the full amount and forgetting the recapture is a common error, and the adjustment belongs in the return calculation, not in a note to yourself.

Home office expenses are restricted by a separate rule. No input tax credit is available for property or services acquired for consumption or use in relation to a work space in a self-contained domestic establishment where the registrant resides, unless the work space is the principal place of business or is used exclusively to earn business income and on a regular and continuous basis for meeting clients, customers, or patients. Expenses for the home as a whole, such as heat and electricity, are apportioned, and expenses for rooms with no business use are excluded.

Passenger vehicles and aircraft carry their own capital property rules, including limits tied to the capital cost limitation for income tax purposes. Do not assume the full tax on a vehicle is claimable because the vehicle is used for the business. Check the CRA guidance for passenger vehicles before claiming, and keep a use log that supports the percentage you claim.

Large businesses in Ontario should also know that the recapture of input tax credits for specified property and services in Ontario was phased out — the CRA's GST/HST Info Sheet GI-171 sets the recapture rate at 0 percent for the provincial part of the HST becoming payable on or after July 1, 2018. If an older reference tells you to report recaptured credits for Ontario at a positive rate, it is describing the phase-out period, not the current position. The adjustment form still exists for the cases it covers, including Schedule B for recaptured input tax credits, so confirm on the current return form whether any recapture line applies to your period rather than assuming it does.

What not to do

• Do not claim credits for purchases made before you became a registrant, or for personal purchases dressed up as business expenses.
• Do not claim a credit before you hold the supporting document, and do not rely on a bank or credit card statement alone where the prescribed invoice information is required — a monthly card statement has to be backed by the receipt or invoice itself.
• Do not claim the full GST/HST on a mixed-use purchase without apportioning, and do not use one flat percentage for every asset.
• Do not claim club memberships, or the personal-use portion of any purchase, and expect the restriction rules not to apply.
• Do not let a missed credit drift past the four-year window, or the two-year window if you are a specified person, while you wait for a tidy quarter.
• Do not claim credits on invoices from a supplier whose registration number you have not checked, on a purchase large enough to matter.

Related guides:

• How to Register for GST/HST in Canada
• How to File a GST/HST Return in Canada
• How to Look Up a GST/HST Number in Canada
• How to Charge GST/HST in Canada
• How to Pay GST/HST to the CRA in Canada

Sources

• Canada Revenue Agency, GST/HST Memorandum 8.1, General Eligibility Rules — the eligibility conditions for an input tax credit: registrant in the reporting period when the tax became payable or was paid, property or services acquired for consumption, use, or supply in commercial activities (the credit follows that extent), sufficient documentary evidence obtained before the claim is made, tax payable or properly paid, and the claim made in a return filed within the time limit. It also carries the substantially-all rule (90 percent or more commercial use lets a registrant other than a financial institution claim 100 percent), the four-year general claim limit, and the two-year limit for specified persons (listed financial institutions, and persons whose threshold amounts exceed $6 million for both the fiscal year that includes the reporting period and the previous fiscal year, with exceptions for charities and for persons whose supplies are all or substantially all taxable).
• Canada Revenue Agency, GST/HST Memorandum 8.4, Documentary Requirements for Claiming Input Tax Credits — what counts as supporting documentation (an invoice, receipt, credit card receipt, debit note, book or ledger entry, written contract, or computerized record; a monthly credit card statement on its own is not enough), and the prescribed information each amount tier requires. The memorandum dates from 2012 and still prints the former $30 and $150 thresholds; the current $100 and $500 thresholds are the ones in News No. 118 and on the CRA's Input tax credits page below.
• Canada Revenue Agency, GST/HST Memorandum 8.2, General Restrictions and Limitations — the restrictions: no credit for club memberships whose main purpose is dining, recreational, or sporting facilities (unless acquired exclusively for resale), none for a work space in a home unless it is the principal place of business or is used exclusively to earn business income and regularly for meeting clients, customers, or patients, none for property or services acquired exclusively for personal use, and the adjustment that recaptures 50 percent of the credits claimed on food, beverages, and entertainment, made in the first reporting period after the fiscal year ends. Passenger vehicles and aircraft carry their own limits tied to the capital cost limit for income tax.
• Canada Revenue Agency, Excise and GST/HST News No. 118 — the documentary thresholds changed from $30 and $150 to $100 and $500, effective April 20, 2021, with the information each current tier requires; without the required information, the CRA may deny the claim.
• Canada Revenue Agency, GST/HST Info Sheet GI-171, Phasing out of Recaptured Input Tax Credits in Ontario — the Ontario recapture phase-out for large businesses (revenues from taxable supplies over $10 million): 100 percent to June 30, 2015, then 75, 50, and 25 percent, and 0 percent for the provincial part of the HST becoming payable on or after July 1, 2018, across the specified property and services (energy, certain telecommunications, food, beverages and entertainment, qualifying motor vehicles and their fuel).
• Canada Revenue Agency, GST/HST and payroll records — records must describe purchases in enough detail to determine the tax and support the amounts claimed; copies of the purchase invoices or receipts behind an input tax credit claim must be kept in your records, and your records must be made available to the CRA when it asks to see them.
• Canada Revenue Agency, Input tax credits — the CRA's current summary of the same rules: the eligibility checklist, the documentary information chart at the current $100 and $500 tiers, the four-year claim deadline (two years for listed financial institutions and for businesses over the $6 million threshold), and confirming a supplier's GST/HST account number before relying on it.