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. The document can be found at the following link. http://www.cra-arc.gc.ca/E/pub/gi/gi-171/gi-171-e.pdf 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