Blog: Phasing out of Recaptured Input Tax Credits in Ontario

July 5th, 2017 tax credit

Since the introduction of HST in Ontario on July 1, 2010, large businesses were required to report Recaptured Input Tax Credits (“RITCs”) in respect of specified property and services (energy, telecommunication services, meals and entertainment, motor vehicles and fuel) on their GST/HST returns.

The RITCs are deducted from the ITCs that are claimed in respect of the acquisition of a specified property or service, reducing the total recovery of GST/HST.

Since July 1, 2015, the RITC restriction is being phased out over a three year period, as follows:

Period Recapture Rate – Ontario
July 1, 2010 to June 30, 2015 100%
July 1, 2015 to June 30, 2016 75%
July 1, 2016 to June 30, 2017 50%
July 1, 2017 to June 30, 2018 25%
On or after July 1, 2018 0%

 

The current RITC rate of 50% used to determine the amount of RITCs will be reduced from 50% to 25% effective on July 1, 2017.

Affected businesses will be required to report the RITCs using the new effective rate in regard to HST that became payable on or after July 1, 2017 when completing Schedule B of their GST/HST Netfile returns. Consequently, for any reporting period that straddles July 1, large businesses may have to use more than one RITC rate to account for the RITC rates in effect before and after July 1.

Additional information is available in the GST/HST Info-Sheet GI-171 available on the Canada Revenue Agency website here.

Download the PDF version of this article here.

Connect with the Author

Frédéric Pansieri, BBA, CPA, CA, Director, Commodity Tax, Crowe Soberman LLP – Frédéric has extensive commodity tax experience, as well as corporate income and experience at the federal level and in various provincial tax jurisdictions across Canada. You may reach Frédéric at frederic.pansieri@crowesoberman.com.

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