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Subscribe to this list via RSS Blog posts tagged in ITC Documentation Requirements

In Budget 2021 the government of Canada proposed changes to the ITC Information Requirements which will generally make it easier for businesses to claim ITCs in two ways:

  1. increasing the dollar thresholds of the ITC Information Requirements; and
  2. expanding the definition of "intermediary" to include billing agents, such that a recipient can obtain the name and/or GST registration number of a billing agent rather than the underlying vendor in order to support an ITC claim.

Some details of these proposals, which are effective starting April 21, 2021, are set out below.

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The recent Tax Court decision in Les Ventes et Façonnage du Papier Reiss Inc. v The Queen (2016 TCC 289) (the Reiss Case) places new emphasis on the verification obligations of GST/HST and QST registrants claiming input tax credits (“ITCs”), confirming and expanding the “duty of verification” first asserted by the CRA in Salaison Lévesque Inc v The Queen (2014 TCC 36: at para 86).

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There has been significant jurisprudence on the extent to which recipients are entitled to ITCs in respect of GST paid to so called “rogue suppliers” – suppliers who collect but fail to remit GST to the fisc.  The CRA has often taken the position that where the recipient fails to make efforts to confirm the identity of its supplliers or where the recipient is wilfully blind to the bona fides of its suppliers, the recipient will not be entitled to ITCs. The recent decision of SNF LP (2016 TCC 12) adds another layer to this analysis.  Although the TCC makes a number of distinct findings, the most interesting aspect might be with respect to a briefly explained conclusion regarding a claim for a rebate of tax paid in error.

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What is really required for GST ITC Claims?

For more years that we can remember, “ITC Documentation” has been a “Top 10” Audit Issue with Canada Revenue Agency GST Audits. This is a reference to the evidentiary requirements imposed by ss. 169(4) of the Excise Tax Act (ETA) and the Input Tax Credit Information (GST/HST) Regulations (the “ITC Regulations”) which the CRA has been prone to interpret as a “documentation requirement”, reviewing and disallowing ITCs claimed for “lack of required documentation”.

The law in this area is fortunately changing, with a recent decision of the Tax Court of Canada (TCC) Forestech Industries v. The Queen. (2009 TCC 591) providing a helpful review on the actual requirements of subsection 169(4) -- which pointedly are not exactly what many CRA auditors would have taxpayers believe.

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