If you are a Canadian entrepreneur, input tax credit (ITC) can be your saviour when it comes to saving you money. Most Canadian businesses are unaware of the full scope of the input tax credit and how it works. We shall break down all this in plain language in this guide so that you can take advantage of it.
At Numeracy Accounting, our business tax team always helps business owners claim their ITCs correctly to maximize their savings.
Learning About Input Tax Credit
First, let’s establish what is input tax credit. If your business buys goods or services and you pay GST or HST, you are able to reclaim the taxes under an ITC. Simply put, an input tax credit allows you to reclaim the GST/HST paid on business expenditures.
For instance, if you purchased office materials and you paid GST worth $100, you can offset that $100 when you declare your taxes. This does not allow businesses to pay taxes on their own expenses.
If you need professional guidance, employing a tax accountant can help you maximize your claims and avoid mistakes.
How GST Input Tax Credit Works
You are able to recover the GST input tax credit on most of the expenses and supplies you pay for your business. They encompass rent, utilities, and even some of the car expenses.
However, all is not covered. Club memberships, food, or personal spending might not be covered. Maintain proper records and receipts with supporting documentation of GST/HST paid.
To make sure that you’re claiming everything correctly, it’s a good idea to have a tax accountant review your expenses. That way, you’re in compliance with the Input tax credit information (GST/HST) regulations and are audit-proof.
Special Cases: HST Input Tax Credit and Provincial Differences
You can claim the HST input tax credit if you’re doing business in a province where HST is charged rather than GST and provincial tax as distinct charges. Ontario and Nova Scotia are two provinces that charge HST, so your claim is simpler as it’s one tax.
But the laws might be a little different in every province. Always check whether there are some special prohibitions based on where you are. Our small business tax accountant services are here to help you based on the province where you have a business.
Eligibility Criteria for Canada Input Tax Credit
To qualify for the Canada input tax credit, you should:
- Be a GST/HST registrant
- Incurred business cost
- Keep proper records like receipts and invoices
- Remit your GST/HST on schedule
Not documenting or late filing may result in the loss of your right to claim. Most businesses lose thousands of dollars because they are unaware of the correct procedures. That is why having someone professional can safeguard your claim.
Final Thoughts
Understanding the input tax credit system is key to saving your tax bill and keeping your business in good health. Understanding what is input tax credit could be the answer to recovering the GST/HST you have already paid.
If you are making a first-time GST input tax credit claim or correcting errors that were previously made, professional help is needed. Our professionals at Numeracy Accounting know all about small business taxes and can make the entire process simple. Stop by our small business tax accountant Mississauga page today and learn how we can assist you.