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.
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).
- You must set up a GST/HST account. You cannot claim ITCs if you do not have a GST/HST account.
- Keep track of all eligible GST/HST costs when making a profession-related sale.
- Always keep track of the items you buy, such as a copy of the billing, vouchers, or contract.
- Keep track of the deadlines for stating Input Tax Credit (ITC).
- You must pay the GST/HST on all foreign goods bought into Canada from a participating region or province.
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?
4. What is Eligible for Input Tax Credit?
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. Annual equipment rental of less than $10,000.
- If you travel for business and make shipments, you can claim input tax credits for these costs.
- Office expenses such as delivery, computers, and office supplies.
- Traveling outside of your office address to make deals with clients or customers.
- Home office expenses, but only if this is your central place for doing business.
- Advertising lease.
2. Four Eligible Capital Expense:
- Important capital asset.
- Furnishings and equipment.
- Machines and automobiles.
- 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 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!