Calculate input tax credits – ITC eligibility percentage
Overview
Determine the types of purchases and expenses
Determine the percentage of use in commercial activities
Determine the ITC eligibility percentage
Choose a method to calculate ITCs
Determine the ITC eligibility percentage
Determine the ITC eligibility percentage (does not include reimbursements or allowances)
The following sections provide details on the ITC eligibility percentage for different type of expenses:
Note
Most charities are limited in the ITCs that they can claim because of the special calculation method called "net tax calculation for charities" that they must use to fill out their GST/HST returns. However, the rules outlined in this section apply if the charity has elected not to use the net tax calculation method.
Operating expenses
The following charts identify the different percentages of the amount of GST/HST paid or payable you can claim as an ITC on most operating expenses that relate to your commercial activities. In certain situations, there are restrictions on the amount that you can claim as an ITC. For more information, see the following charts:
- ITC eligibility on operating expenses (other than meals and entertainment)
- ITC eligibility on meals and entertainment expenses
- ITC eligibility on club memberships
- ITC eligibility on expenses charged to procurement cards
ITC eligibility on operating expenses (other than meals and entertainment)
Percentage of use in commercial activities |
ITC eligibility for most businesses (including charities that have elected not to use the net tax calculation) |
ITC eligibility for financial institutions Footnote 1 |
|---|---|---|
| 90% or more | 100% | % of use |
| More than 10% and less than 90% | % of use | % of use |
| 10% or less | No ITCs | % of use |
If you have both commercial activities and non-commercial activities (such as exempt supplies), and at least 90% of an operating expense cannot reasonably be allocated to either your commercial or your non-commercial activities, you apportion the GST/HST paid or payable for the property or service between these two activities for ITC purposes. You can generally claim ITCs only for the part of the GST/HST paid or payable for the property or service that relates to the consumption or use in your commercial activities.
Example – Apportion of commercial activities and non-commercial activities
You own a building in Nova Scotia where you operate your retail store (a commercial activity), and you rent an apartment on the upper floor to a residential tenant on a long-term basis (an exempt activity). The rent includes utilities. Your utility bill for the building that is used for both commercial and exempt activities includes $80 HST. If all other conditions for claiming an ITC are met and you use a fair and reasonable allocation method to determine that 70% of the utility bill relates to the store and 30% to the apartment, you can claim an ITC for 70% of the HST you pay on your utility bill:
$80 (HST) × 70% = $56 (ITC)
The method you use to determine the percentage that an operating expense is used in your commercial activities has to be fair and reasonable, and used consistently throughout the year.
ITC eligibility on meals and entertainment expenses
The following chart identifies the different percentages of the amount of GST/HST paid that you can claim as an ITC on reasonable meals and entertainment expenses that relate to your commercial activities.
| ITC eligibility for most businesses | ITC eligibility for charities and public institutions | Long-haul truck drivers |
|---|---|---|
| 50% | 100% | 80% |
ITC eligibility on club memberships
You are not eligible to claim an ITC in respect of the GST/HST paid or payable on a membership, or on a right to acquire a membership, in a club the main purpose of which is to provide dining, recreational or sporting facilities. However, you can claim an ITC if the membership or right is acquired by you exclusively for supply in the ordinary course of your business of selling such memberships or rights.
For more information, see GST/HST Memorandum 8.2, General Restrictions and Limitations.
| Examples | Then |
|---|---|
| A GST/HST registrant purchases memberships to a tennis club for $10,000 plus $500 GST. The memberships are acquired exclusively for purposes of selling them to clients in the ordinary course of the registrant's business of selling such memberships. | The GST/HST registrant is entitled to claim an ITC of $500, provided all other ITC requirements are satisfied. |
| A GST/HST registrant purchases a golf club membership. | The GST/HST registrant is not eligible to claim an ITC with respect to the GST/HST paid on this membership. |
ITC eligibility on expenses charged to procurement cards
Procurement cards or purchasing cards are charge cards with pre-set spending limits. These cards allow your employees to make business purchases more efficiently than through the normal purchase order or invoice cycle.
The statements and reports provided by the procurement card or corporate credit card issuers might not provide enough information about your purchases to support your claim for ITCs.
Provided certain conditions are met, eligible registrants can apply to the CRA to use ratios to claim ITCs for individual purchases under $1,000 made using procurement cards.
In cases where the documentary requirements are not satisfied, ITC cannot be claimed until the GST/HST registrant obtains additional supporting documentation to establish the particulars of the purchases, or obtains an exemption from the documentary requirements.
The CRA will permit GST/HST registrants to use factors for calculating ITCs on expenses charged to procurement cards and corporate credit cards provided they satisfy certain conditions.
For more information on expenses charged to procurement cards, see GST/HST NOTICE199, Procurement cards – Documentary Requirements for Claiming Input Tax Credits.
Capital personal property expenses
The following charts identify the different percentages of the amount of GST/HST paid or payable you can claim as an ITC on most capital personal property that relate to your commercial activities. The type of vehicle you purchase can affect the calculation to claim your ITCs. For more information, see the following charts:
- ITC eligibility on capital personal property (other than passenger vehicles and aircraft)
- ITC eligibility on capital personal property of passenger vehicles and aircraft
ITC eligibility on capital personal property – Personal Property
| Percentage of use in commercial activities | ITC eligibility for most businesses (including charities that have elected not to use the net tax calculation) | ITC eligibility for financial institutions Footnote 32c |
|---|---|---|
| More than 50% | 100% | % of use |
| 50% or less | No ITCs | % of use |
ITC eligibility on capital personal property – Passenger vehicles and aircraft
Percentage of use in commercial activities |
ITC eligibility for corporations Footnote 2a and public service bodies | ITC eligibility for partnerships and sole proprietorship (including charities that have elected not to use the net tax calculation) | ITC eligibility for financial institutions Footnote 2c |
|---|---|---|---|
| 90% or more | 100% | 100% | % of use |
| More than 50% and less than 90% | 100% | Fraction X CCA Footnote 2b | % of use |
| More than 10% and less than 50% | No ITCs | Fraction X CCA Footnote 2b | % of use |
| 10% or less | No ITCs | No ITCs | % of use |
Capital real property expenses
The following chart identifies the different percentages of the amount of GST/HST paid or payable you can claim as an ITC on most capital real property that relate to your commercial activities.
Percentage of use in commercial activities |
ITC eligibility for individuals, corporations and partnerships | ITC eligibility for public service bodies Footnote 3b (including charities that have elected not to use the net tax calculation) | ITC eligibility for Financial institutionsFootnote 3c |
|---|---|---|---|
| 90% or more | 100% | 100% | % of use |
| More than 50% and less than 90% | % of use | 100% | % of use |
| More than 10% and less than 50% | % of use Footnote 3a | No ITCs | % of use |
| 10% or less | No ITCs | No ITCs | % of use |
Determine the ITC eligibility percentage for reimbursements or allowances to an employee, partner, or volunteer
You may be eligible to claim an ITC in respect of an amount reimbursed or an allowance paid to employees, partners, or volunteers for the acquisition of property or services for use related to your commercial activities.
Examples of reimbursements and allowances for which you may be eligible to claim an ITC
- food, beverages, and entertainment
- parking
- supplies
- union, professional, or similar dues
- motor vehicle expenses (for example, fuel, maintenance and minor repairs, insurance, license, registration)
- work space in home (for example, electricity, heat, water, maintenance)
Where an allowance or a reimbursement is paid for a qualifying item that is subject to the point-of-sale rebate for the provincial part of the HST, no ITC may be claimed for the provincial part of the HST that has been rebated.
ITC eligibility on reimbursements
You can generally claim ITCs for the GST/HST included in reimbursements you pay to your employees or the partners in your partnership for expenses they incurred in Canada on your behalf for your commercial activities.
If you are a charity or public institution, you may also be able to claim ITCs for the GST/HST included in reimbursements you pay to your volunteers for expenses incurred on your behalf that relate to your commercial activities.
For more information, see GST/HST Memorandum 9.4, Reimbursements.
ITC eligibility on allowances
Generally, you are considered to have paid the GST/HST on a reasonable allowance you pay to your employees or partners (or volunteers if you are a charity or a public institution) if all of the following conditions are met:
- The allowance is used to pay GST/HST-taxable (other than zero-rated) expenses and at least 90% of the expenses are incurred in Canada, or the allowance is for the use of a motor vehicle in Canada.
- The allowance is or would be deductible for income tax purposes.
- The expenses incurred by your employees, partners, or volunteers would have been eligible for ITCs if you had incurred them.
For more information, see GST/HST Memorandum 9.3, Allowances.
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