Input Tax Credits (ITCs)

What an ITC is

An Input Tax Credit (ITC) is a recovery of the GST/HST that a registrant has paid, or is payable, on property and services acquired for consumption, use, or supply in the course of its commercial activity. The ITC rule in ETA s.169 is what converts GST/HST from a cascading tax into a true value-added tax: each business along the supply chain remits only the net difference between tax collected on its outputs and tax paid on its inputs. ITCs form part of line 108 when filing electronically, or appear separately on line 106 on a paper return.

Who can claim, and on what

• General eligibility under ETA s.169(1): the registrant must be a registrant at the time the tax becomes payable, and the property or service must be acquired for consumption, use, or supply in commercial activity.
• The purchase must be reasonable in quality, nature, and cost in relation to the business (ETA s.170(2)).
• The registrant must hold the supporting documents before it files the return that claims the ITC (ETA s.169(4)). What those documents must show is set out below.
• Commercial activity excludes exempt supplies. ITCs on inputs used for exempt activities are not recoverable (ETA s.141.01).
• Apportionment: where an input is used partly in commercial activity and partly in exempt or personal activity, ITCs are claimed to the extent of commercial use. The method must be fair, reasonable, and used consistently.

Capital property

• For an ordinary commercial corporation that is not a financial institution, capital personal property such as computers, equipment and furniture: under ETA s.199(2) the ITC is available only if the asset was acquired for use primarily, meaning more than 50%, in commercial activities. When it is, the asset is treated as used exclusively in commercial activities and the full ITC is claimed. At 50% or less, there is no ITC at all.
• Passenger vehicles: the tax that can be claimed is capped at the tax on the capital cost limit that applies for income tax purposes (ETA s.201), so the ITC on an expensive car stops at the tax on that limit. See CCA Class 10 and 10.1.
• Passenger vehicles of a sole proprietor or partnership follow their own rule (ETA s.202). The full ITC is claimed up front only if the vehicle is acquired for use exclusively, meaning all or substantially all, in the business. Otherwise the ITC is claimed once a year, at the end of the tax year, on the capital cost allowance deducted for the business use of the vehicle that year.
• Real property, such as an office condo: a corporation claims the ITC to the extent the property is used in commercial activities, and adjusts it under ETA s.206 when that use changes. Individuals and public sector bodies follow different rules. See GST on real property.

What you cannot claim

• Club memberships whose main purpose is dining, recreational, or sporting facilities (ETA s.170(1)(a)). See club memberships.
• For a sole proprietor or a partner, costs of a work space in the home they live in, unless it is the principal place of business, or it is used only for the business and regularly and continuously for meeting clients, customers or patients (ETA s.170(1)(a.1)). See home office.
• Property or services bought exclusively for the personal use of an officer or employee, or someone related to them, unless the corporation charges fair market value for it or no taxable benefit would arise (ETA s.170(1)(b)). For an owner-manager, that covers personal items the corporation buys for the owner.
• Half of the tax on meals and entertainment. ETA s.236 matches the 50% income tax limit: a registrant that claimed the full ITC on those expenses during the year adds 50% of those credits back to net tax once a year, on line 104 of the return (20% for meals of long-haul truck drivers). See meals and entertainment.
• Tax on inputs used to make exempt supplies, such as residential rent or financial services.

The documents you need before you claim

ETA s.169(4) bars an ITC unless, before filing the return in which the credit is claimed, the registrant has evidence containing the information prescribed by section 3 of the Input Tax Credit Information (GST/HST) Regulations (SOR/91-45). CRA auditors apply this rule strictly: a claim without the required documentation is disallowed even if the ITC would otherwise be valid.

The tier depends on the total amount paid or payable shown on the document, tax included. When one invoice covers several items, the tier follows the invoice total, not each line.

• The registration number is the supplier's nine-digit Business Number with the RT program identifier, for example 123456789 RT 0001. Required supporting records for purchases of $100 or more must include the supplier's or intermediary's valid GST/HST registration number. CRA's registry lookup uses the nine-digit BN; do not reject a valid number solely because a receipt omits the RT suffix.
• An intermediary is a registrant that acts for the supplier, or under an agreement with it, and causes or facilitates the supply, such as a business that sells on the supplier's behalf. Its name and registration number can stand in for the supplier's.
• Supporting documentation can be an invoice, a receipt, a credit-card receipt, a debit note, a book of account, a written contract, or a record in an electronic system (section 2 of SOR/91-45). A monthly credit-card statement is not enough on its own, because it does not carry the prescribed information. A card slip or receipt works when it shows everything its tier requires, which at $100 or more includes the supplier's GST/HST number.
• The $100 and $500 thresholds replaced $30 and $150 effective April 20, 2021. Memorandum 8-4 still describes the old amounts; the regulation governs.
• For imported goods the GST is paid to the Canada Border Services Agency, so the supporting record is CBSA's accounting document for the import, not a supplier invoice. For commercial goods that is the Commercial Accounting Declaration in CBSA's CARM system, which replaced Form B3-3 (CBSA Memorandum D17-1-5, October 21, 2024).
• Match each document to the bookkeeping entry it supports, so any claim can be traced from the return back to its receipt.
• Keep the records for six years after the end of the year they relate to (ETA s.286(3)), in Canada and in English or French unless CRA authorizes otherwise, and in an electronically readable format if they are kept electronically. See six-year retention and electronic records.

Example: working out a quarter's claim

A BC corporation is a registrant with $100,000 of taxable consulting revenue in its Q2 2026 reporting period. Its expenses (inputs used 100% for commercial activity) are office rent $12,000, a new laptop $3,000, and software subscriptions $2,400, all taxable at 5%.

GST collected on revenue:    $100,000 × 5% = $5,000

ITCs on inputs
Office rent GST:                $12,000 × 5% = $600
Laptop GST (capital, 100% use):  $3,000 × 5% = $150
Software GST:                    $2,400 × 5% = $120
Total ITCs:                                    $870

Net tax owing to CRA:                        $4,130

The $870 of tax previously paid to suppliers is fully recovered against the $5,000 collected, so only the $4,130 of net value-added flows to the Receiver General.

Example: which receipts hold up

The same corporation checks three receipts from the quarter against the documentation tiers.

Receipt A, lunch meeting with a client:  $38.72 including tax
  Tier: under $100
  Required: supplier name, date, total (all present)
  ITC status: eligible, and half of it is added back
              under the meals rule at year-end

Receipt B, co-working desk, monthly:    $265.50 including tax
  Tier: $100 to $499.99
  Required: supplier name, date, total, GST/HST number,
            tax amount
  GST/HST number on invoice: YES (123456789 RT 0001)
  Tax shown: $12.64 GST
  ITC status: eligible

Receipt C, design contractor invoice: $2,100.00 including tax
  Tier: $500 or more
  Required: all of the above plus purchaser name,
            terms of payment, description
  Missing: purchaser name (made out to an email address only)
  ITC status: not eligible until a corrected invoice is obtained

Receipt C can still be fixed before the return is filed: a corrected or supplementary invoice naming the corporation as purchaser restores the $100 ITC. If the return goes in first, the ITC can be claimed on a later return once the corrected invoice arrives, within the time limit below.

How ITCs reach the return

Line 103 is the tax collected or collectible, line 104 the adjustments that add to net tax (such as the meals add-back), line 106 the ITCs, and line 107 the adjustments that reduce it. Instalments (line 110) and rebates (line 111) are then taken off line 109: a positive balance is paid, and a negative one is claimed as a refund on line 114.

Line 106 takes current and eligible previously unclaimed ITCs on paper. Electronic returns generally combine ITCs and decreasing adjustments on line 108, and collected tax and increasing adjustments on line 105. CRA return instructions.

The deadline to claim

• Most registrants must claim an ITC in a return filed by the due date of the return for the last reporting period that ends within four years after the end of the period in which the ITC could first have been claimed (ETA s.225(4)).
• The limit is two years for listed financial institutions and for registrants whose threshold amounts exceed $6 million in both the current and the previous fiscal year, with exceptions for charities and for registrants whose supplies are nearly all taxable.

Corporation, annual filer, calendar fiscal year
ITC first claimable in:        2022 period (ends Dec 31, 2022)
Last period ending within
  four years after that:       2026 period (ends Dec 31, 2026)
Claim it in a return filed by: March 31, 2027

Quarterly filer
ITC first claimable in:        Q1 2022 (ends Mar 31, 2022)
Last period ending within
  four years after that:       Q1 2026 (ends Mar 31, 2026)
Claim it in a return filed by: April 30, 2026

Three ways to calculate

The regular method claims the actual tax shown on each document. Small businesses can instead use the Simplified Method, which computes ITCs from tax-included purchase totals but leaves the documentary requirements unchanged, or the Quick Method, which replaces ITCs on operating expenses with a flat remittance rate. Under the Quick Method, ITCs can still be claimed on real property and on capital assets such as computers and vehicles, and those claims still need documents.

Common mistakes

• Claiming ITCs on inputs used to make exempt supplies (residential rent, financial services). These are simply operating costs.
• Claiming ITCs without adequate documentation. The documents must be in hand before the return that claims them is filed.
• Relying on a credit-card statement alone at the $100 or higher tiers. The statement does not show the supplier's GST/HST number.
• Missing the supplier's GST/HST number on a $250 receipt. No number, no ITC.
• Accepting an invoice of $500 or more with no purchaser name, or only an email address. The corporation's name, its trade name, or the name of its authorized representative must appear.
• Claiming the full tax on a passenger vehicle above the cost cap, or on an asset used 50% or less in the business. The cap in ETA s.201 and the primary-use test in s.199(2) both apply.
• A sole proprietor claiming the full ITC up front on a car that is also driven for personal use. Unless the business use is exclusive, the ITC is claimed each year on that year's business CCA (ETA s.202).
• Keeping an unrestricted ITC on ordinary meals and entertainment. Claim only the allowable portion in each period, or use the permitted full-claim/annual-adjustment approach; do not reduce the same credit twice.
• Missing the four-year ITC claim window. For a corporation filing annually on a calendar year, an ITC first claimable in its 2022 period must be claimed in a return filed by March 31, 2027.
• Throwing away the paper receipt after entering it into bookkeeping software without keeping a readable copy. Records must survive six years.
• Assuming the Simplified ITC Method removes the documentary requirements. It changes the arithmetic, not the records.

Related concepts

ITC claims depend on the documents above and on keeping them. Small businesses can elect the Simplified Method to compute ITCs from total eligible purchases, or the Quick Method to skip ITCs on most operating costs and remit a flat rate. ITCs only apply to inputs used for taxable and zero-rated supplies, and a small supplier gets them only by registering voluntarily.