This is the first entry in a two-part discussion on the
documentation requirements to claim Input Tax Credits (ITCs) for
Goods and Services Tax / Harmonized Sales Tax (GST / HST)
To begin, I'm focusing in on exactly what is required to
substantiate an ITC claim. Note that this blog has been written
under the assumption that the business has already taken the steps
to ensure it is eligible to claim ITCs in respect of its commercial
A business that is registered for GST / HST purposes is entitled
to ITCs for the tax paid on business inputs used in commercial
activities. The business must retain proper documentation to
substantiate the claim. However, the documentation requirements are
onerous and businesses often find themselves caught off guard
during a GST / HST audit, with ITCs being denied due to unexpected
issues with the invoices.
The Excise Tax Act (ETA) prescribes a list of information that
must be present on an invoice in order for the recipient of that
supply to claim ITCs. The information required is different
depending on the dollar value of the invoice. For smaller amounts
the requirement is less stringent and vice versa.
As a business that claims ITCs, it is crucial to ensure all
required information is present on the invoice.
The required information is summarized as follows:
There are a number of exceptions to the rules outlined above.
For a complete list of the exceptions, please refer to New
Memorandum 8.4. Some of the notable exceptions are expense
reports filed by employees, computerized records, contractual
agreements, allowances, and taxi fares.
It is nearly impossible to ensure all your expenditures meet the
documentation requirements. At a minimum it is recommended you
perform a periodic check of large capital purchases and expenses.
Perhaps on a monthly basis review the invoices for all expenditures
over a certain dollar amount or the largest 10 to 20 invoices.
Building this practice into the month-end process will help make
the period checks a priority. The objective is to ensure the
documentation requirements are met on the larger expenditures and
deal with any issues before an auditor calls. For example, if a
particular invoice doesn't have the supplier's registration
number present, you can ask the supplier to re-issue the
While the documentation requirements may seem straightforward,
the application of them has some interesting implications. I'll
discuss more of the issues and pitfalls in my next installment.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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