GST/HST Input Tax Credit (ITC) Documentation

Posted on February 13, 2017 by djb | Posted in GST/HST

Based on our commodity taxexperience, the majority of the issues that arise on a GST/HST audit has to do with documentation, or a lack there of.   The Canada Revenue Agency (CRA) has strict requirements that have to be met in order to claim an ITC.  Paragraph 169(4)(a) of the Excise Tax Act  outlines the information that is required to support the ITC claim.  Specifically, the GST/HST registrant must, before filing the return for the reporting period in which the ITC is to be claimed, obtain sufficient evidence in such form and containing such information as to allow the amount of the ITC to be determined, including information prescribed under the Input Tax Credit Information (GST/HST) Regulations.

Supporting documentation for claiming an ITC is prescribed by regulation and includes:

a.   an invoice;
b.   a receipt;
c.   a credit card receipt;
d.   a debit note;
e.   a book or ledger of account;
f.    a written contract or agreement;
g.   any record contained in a computerized or electronic retrieval or data storage system; &
h.   any other document validly issued or signed by a registrant in respect of a supply made by the registrant on which the GST/HST is paid or payable.

In addition, the invoices that you receive have to meet specific documentary requirements based on the amount of the purchase.  Please refer to the chart below that outlines that must be on documentation in order to claim a valid ITC (from CRA website):

GST/HST prescribed information under the Input Tax Credit Information (GST/HST) Regulations Total amount paid or payable is < $30 Total amount paid or payable is > 30$ or more, but < $150 Total amount paid or payable is >= $150 or more
Supplier or intermediary’s name, or the name under which it does business. X X X
Date of invoice or, where no invoice is issued, the date tax is paid or payable. X X X
Total amount paid or payable for all supplies. X X X
Supplier or intermediary’s GST/HST registration number. X X
Where the amount paid or payable for the supply or the supplies does not include the amount of GST/HST,
i. the amount of tax paid or payable in respect of each supply or all the supplies, or
ii.(where provincial sales tax (PST) is payable in respect of each taxable supply that is not a zero-rated supply and is not payable in respect of any exempt supply or zero-rated supply,A. the total of the GST/HST and PST paid or payable in respect of each taxable supply, and a statement to the effect that the total in respect of each taxable supply includes the GST/HST paid or payable, or
B.the total of the GST/HST and PST paid or payable in respect of all taxable supplies, and a statement to the effect that the total includes the GST/HST paid or payable.Where the amount paid or payable for the supply or supplies includes GST/HST and one or more supplies are taxable supplies that are not zero-rated supplies, a statement to the effect that GST/HST is included in the amount paid or payable for each taxable supply, the total tax rate and the amount paid or payable for each supply or the total amount paid or payable for all such supplies to which the same total tax rate applies.
X X
Indication of the status of each supply where the invoice includes both taxable and exempt supplies. X X
Recipient’s name or trading name, or the name of the recipient’s agent or duly authorized representative. X
Terms of payment. X
Brief description of each property or service sufficient to identify it. X

When your company has poor documentation, it makes it easy for a CRA auditor to deny an ITC based on the requirements above; thus turning what should have been tax you could have recovered into a cost for your business. A good accounting system, including good documentation will save you concern during a GST/HST audit, in addition to saving your company money.

Article written by:  Greg Sawatsky, MAcc, CPA, CA

Read other GST/HST articles or learn more about DJB’s Commodity Tax Services.