Phasing out of Recaptured Input Tax Credits in ON

Phasing out of Recaptured Input Tax Credits in ON A reminder for large businesses with taxable revenues over $10 million, subject to the restricted input tax credit rules, that on July 1, 2015, the amount of RITC add-back is reduced from 100% of the 8% provincial portion of the HST to 75% of the 8% provincial portion of the HST. The recapture rate was 100% for the first five years that HST was in effect in Ontario. Starting this July, it will be gradually reduced over the next three years. 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, 2015, the restriction will be reduced to 75% thus the entry will now be:

DR Auto fuel expense 106
DR GST receivable 13
CR Accounts Payable 113
CR RITC payable 6

Earlier this month 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. These changes can be confusing but we are here to help! If you have any questions, don’t hesitate to contact me at mtessier@welchllp.com.

Mona Tessier, CPA, CA
Senior Manager, Indirect Tax