Calculate input tax credits – Methods to calculate the ITCs
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
Choose a method to calculate ITCs
Calculate ITCs using the regular method
To calculate your ITCs, you add up the GST/HST paid or payable for each purchase and expense of property and services you acquired, imported, or brought into a participating province. You multiply the amount by the ITC eligibility you can claim. You calculate adjustments for change in use, sales or improvements. You also calculate adjustments for the following:
How to calculate ITCs for meals and entertainment expenses
Methods to calculate  Then 

You can claim 50% of the actual GST/HST you pay on these expenses during each reporting period  By choosing this method, you do not have to make any adjustments at the end of your fiscal year. 
You can claim 100% ITCs for these expenses throughout your fiscal year. See example  Monthly or quarterly filers – add 50% (or 20% for longhaul truck drivers) adjustment for the excess ITCs you claimed during the year to your net tax calculation in your first reporting period for the following fiscal year. Enter the adjustment on line 105 of your GST/HST return (or line 104 if you are filing on paper). Annual filers – add the 50% (or 20% for long haultruck drivers) adjustment to your net tax calculation for that fiscal year. Enter the adjustment on line 105 of your GST/HST return (or line 104 if you are filing on paper). 
Note
This does not apply to charities or public institutions. These persons may be able to claim a 100% ITC.
How to calculate ITCs for reimbursements
A full ITC (or 50% if meals and entertainment) for the GST/HST paid in respect of a reimbursement made to an employee is available only to a GST/HST registrant if the employer reimburses 100% of the expense. When the reimbursement is less than 100% of the expense, the ITC is prorated based on the percentage of the cost that was reimbursed.
You can calculate your ITCs using the two following methods:
Methods to calculate  Then  

Determine the actual GST or HST you incurred on reimbursed expenses  If the GST or HST is paid by the employee, partner, or volunteer, multiply by the lesser of:


Calculate the reimbursement multiplied by a factor  If the GST/HST was charged on 90% or more of the total amount you reimbursed for expenses, multiply by:
For meals and entertainment, multiply by the Determine the ITC eligibility percentage for those expenses. 
The method you choose to calculate your ITCs for reimbursements must be used consistently throughout your fiscal year. For more information, see GST/HST Memorandum 9.4, Reimbursements.
How to calculate ITCs for allowances
You need to calculate the amount of GST or HST that you are considered to have paid on a reasonable allowance.
If 90% or more of the expenses were subject to the HST in a province, or the allowance was for a motor vehicle used 90% or more in the same province, multiply by:
 5/105 if you paid 5% GST
 12/112 if you paid 12% HST
 13/113 if you paid 13% HST
 14/114 if you paid 14% HST
 15/115 if you paid 15% HST
For meals and entertainment, multiply by the Determine the ITC eligibility percentage for those expenses.
Use the lowest tax fraction among two or more participating provinces if 90% of the expenses were subject to the HST in those provinces, or the allowance was for a motor vehicle used 90% or more in those participating provinces.
A motorvehicle allowance that is reasonable for income tax purposes also qualifies as a reasonable allowance for GST/HST purposes.
For more information, see GST/HST Memorandum 9.3, Allowances.
Calculate ITCs using the simplified method
The simplified method for claiming ITCs is another way for eligible registrants to calculate their ITCs when completing their GST/HST return using the regular method of filing. You do not have to file any forms to use it. The following will help you determine if you are eligible and how to calculate:
Find out if you are eligible to use the simplified method
As of January 1, 2013, you are eligible to use the simplified method for claiming ITCs if you meet all of the following conditions:
 Your annual worldwide revenues from taxable property and services (including those of your associates) are $1 million or less in your last fiscal year.
 Your total taxable supplies (including those of your associates) for all preceding fiscal quarters of the current fiscal year must also be $1 million or less. These limits do not include goodwill, zerorated financial services, or sales of capital real property.
 You have $4 million or less in taxable purchases made in Canada in your last fiscal year. This includes purchases imported into Canada or brought into a participating province. This does not include zerorated purchases.
If you are  Then 

Charity  You can use the simplified method for claiming ITCs once you have elected not to use the net calculation for charities. For more information, see Can you choose not to use the net tax calculation method assigned to charities? 
Public service body  You must be able to reasonably expect that your taxable purchases in the current fiscal year will not be more than $4 million. 
Listed financial institutions  You cannot use the simplified method for claiming ITCs. 
Determine when can you start to use the simplified method
If you qualify, you can start using the simplified method at the beginning of a reporting period. You do not have to file any forms to use it. Once you decide to use this method, you have to use it for at least one year if you continue to qualify.
Find out how the simplified method works
If you make purchases in both participating and nonparticipating provinces, you have to separate your taxable purchases based on the rate of GST/HST you paid.
You can use this simplified method to calculate ITCs only for purchases you use to provide taxable property and services. If you use your purchases for personal use, or to provide both taxable and exempt property and services, only the part used for providing taxable property and services can be included in the ITC calculation. If you use a purchase at least 90% of the time to provide taxable property and services, include the total purchase price in your ITC calculation.
How to calculate ITCs using the simplified method
Steps  Then 

Step 1 – Add up your ITC eligible expenses  When you make purchases in both participating and nonparticipating provinces, you have to separately add up your purchases that are taxed at different GST/HST rates. For the list of all applicable GST/HST rates, see GST/HST rates. Your totals should include: Include purchases of capital personal property and improvements to such property if you use the property more than 50% in your commercial activities. Your totals will include:
Your totals should not include:

Step 2 – Multiply the amount(s) calculated in step 1  Multiply the amount(s) you calculated in step 1 by:

Step 3 – Add any adjustments to your ITC amount calculated in step 2  Add the following amounts, if they apply, to your ITC amount calculated in step 2:
Include this total in your line 108 calculation if you are filing electronically (or line 106 if you are filing on paper). 
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