Input Tax Credits: Who can Claim, and What are the Eligible Criteria?

by | Jun 1, 2022

Did you know that when you register for GST/HST, you can claim your Input Tax Credit on purchases? This is the most critical advantage of opening an account. But tax season can be one of the most stressful times of the year if you own a business in Mississauga. Filling out your annual tax return with all the paperwork is even more difficult. It’s also challenging to claim ITCs for everything.
One thing you can do to determine which products you can claim as ITCs is to keep your bookkeeping up to standard. If you want, you can also use our bookkeeping services!
Many businesses, like ours in Mississauga, are here to assist you throughout the process. Thus, Yogi & Associates will help you understand what ITCs are and how they work. It will assist you in making claims on

1. What are The Input Tax Credits?

The Canada Revenue Agency (CRA) offers an input tax credit for goods subject to the GST and HST. The input tax credit allows you to collect the local income tax paid on your goods.

Additional Information:

You may be able to claim some of these credits if you pay GST/HST on goods or services purchased for your corporate. Input Tax Credit can lower your business income taxes by 25%, 40%, or even 50%, depending on the type of goods and services you buy.

2. Five Ways to Claim your Input Tax Credit:

Consider the following when claiming an Input Tax Credit (ITC).

  1.  You must set up a GST/HST account. You cannot claim ITCs if you do not have a GST/HST account.
  2. Keep track of all eligible GST/HST costs when making a profession-related sale.
  3. Always keep track of the items you buy, such as a copy of the billing, vouchers, or contract.
  4. Keep track of the deadlines for stating Input Tax Credit (ITC).
  5. You must pay the GST/HST on all foreign goods bought into Canada from a participating region or province.

Additional Information:

Most businesses with more than $6 million in annual sales are eligible for ITCs. You can claimITCs within four years of the due date of the original return for which they are declared.

To learn about GST/HST registration, you can see the article: Register for GST/HST Account: When and How? 

3. Who is Eligible to Claim the Input Tax Credit?

The CRA will not allow you to claim an ITC if someone else is liable to pay for it. One of the most common reasons the CRA denies an ITCS claim is if someone other than the recipient claims it.

4. What is Eligible for Input Tax Credit?

You must understand which expenses qualify to claim ITC. If you fail to, the CRA will disqualify you from claiming ITCs. This can lead to a considerable tax burden you can’t afford.

According to the CRA, the following are some of the expenses for which you can claim Input Tax Credits:

1. Six Eligible Business Expenses:

  1. 1. Annual equipment rental of less than $10,000.
  2. If you travel for business and make shipments, you can claim input tax credits for these costs.
  3. Office expenses such as delivery, computers, and office supplies.
  4. Traveling outside of your office address to make deals with clients or customers.
  5. Home office expenses, but only if this is your central place for doing business.
  6. Advertising lease.

2. Four Eligible Capital Expense:

  1. Important capital asset.
  2. Furnishings and equipment.
  3. Machines and automobiles.
  4. Increase in capital land.

5. What is Not Eligible for Input Tax Credit?

You cannot claim ITCs on products you bought for personal use and enjoyment. For example, you cannot claim ITCs on the following items and expenses:

1. If you imported taxable goods and services to provide exempt goods and services.
2. If you use your investment property for personal rather than business purposes.
3. If you pay membership payments to a club whose prime task is to provide dining and sports fields.

6. Bookkeeping Requirements:

Bookkeeping is essential to keeping track of your company’s finances. It also ensures accurate reporting.

Bookkeeping must generally be stored in Canada under GST/HST rules. The basic rule is you must keep your books up to date. Also, you must hold your bookkeeping records for six to seven years after the end of the fiscal year.

As a business owner, you must ensure that your bookkeeping records are up to date. You must also keep track of the taxes you pay and collect and those you owe. You can also get our bookkeeping services for this task for you!

5. Let’s Wrap it up!

When you own a business, you want to make sure you get the best tax breaks possible. It can be difficult to understand what you need to do to qualify for Input Tax Credits.

This is where Yogi & Associates can help. We’ll assess your situation and advise you on the best ways to qualify for Input Tax Credits. So please contact our team right away!

Contact Yogi & Associates today: