Continuation of the Phasing out of Recaptured Input Tax Credits in Ontario

Continuation of the Phasing out of Recaptured Input Tax Credits in Ontario

Note for large businesses with taxable revenues over $10 million subject to the restricted input tax credit rules, a reminder that on July 1, 2016 the amount of RITC add-back is further reduced from 75% of the 8% provincial portion of the HST to 50% of the 8% provincial portion of the HST. In case you missed it, on July 2015 the RITC add-back was reduced from 100% of the 8% provincial portion of the HST to 75% of the 8% provincial portion of the HST.

Below is a sample entry to record a $100 auto fuel expense plus $13 of HST subject to the 100% restriction.

DR Auto fuel expense 108
DR GST receivable 13
CR Accounts Payable 113
CR RITC payable 8

After July 1, 2016, the restriction will be reduced to 50% thus the entry will now be:

DR Auto fuel expense 104
DR GST receivable 13
CR Accounts Payable 113
CR RITC payable 4

Last year CRA released a document entitled GI-171 Phasing out of Recaptured Input Tax Credits in Ontario which provides additional information with respect to this change. The document can be found here.

Author

Mona Tessier, CPA, CA
Principal, Indirect Tax Specialist
mtessier@welchllp.com
613-236-9191 #207