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Recapture of Input Tax Credits – Everyone Is Potentially Affected


With the introduction of Harmonized Sales Tax (“HST”) in British Columbia and Ontario now a year behind us, a review of some of the rules is in order, and very timely. Specifically, RITC's, which have the potential to affect any business registered for GST/HST purposes with operations in BC or Ontario, provided the business has more than $10 million in revenues across its own operations and those of all of its associates.

While RITC's are temporary in nature, they will not be completely phased out until 2018, so they are an important consideration for the near and medium term future. RITC's recapture the provincial component (“PVAT”) of HST in BC and Ontario, which is 7% and 8%, respectively, but only on specified property and services, which include:

  • Qualifying motor vehicles (generally a licensed motor vehicle weighing less than 3000 kg),
  • Specified energy and utilities,
  • Specified telecommunications services, and
  • Specified meal and entertainment expenditures

But what if you have no permanent establishment or presence in either BC or Ontario? You still may have incurred expenditures that fall into the list mentioned above. Maybe you used your cell phone while in Vancouver for a business call, or perhaps you attended a convention in Toronto and had a couple of meals out in the evenings. It was cheaper to drive your vehicle for a sales call in Quebec, and you traveled partway through Ontario, for which you were reimbursed mileage. If you and your associates have more than $10 million in revenue, each one of these situations has impacted your ability to claim ITC's.

Am I affected by RITC's?

These questions will help you determine if you have to account for RITC's:

  • Does my business and all of its associates have taxable supplies in excess of $10 million?
  • Did I incur any expenditures in respect of my commercial activities in BC or Ontario where I paid BC or Ontario HST?

If you answered yes to both of these questions, you’re affected and need to go further.

So, I’m affected by RITC's. What do I do now?

These steps will help you catch up and fix any errors:

  1. You’ll need to determine the amount of HST you paid on the specified property and services you consumed in BC and/or Ontario.
  2. Next, you’ll need to calculate the PVAT component, separately for the BC HST and the Ontario HST
  3. RITC's have to be accounted for in an on-line format, such as NetFile. Claim the full amount of HST paid on your expenditures in Box 106.
  4. Follow the prompts to report the RITC's, separate boxes for BC and Ontario PVAT.

Should you need further assistance, or have specific questions about RITC's or other GST/HST concerns, please contact a member of the Indirect Tax Team for assistance.