ITC recapture – changes effective July 1 , 2015

March 28, 2017

When HST was introduced in Ontario in July 2010, large businesses were subject to restrictions (in the form of a recapture) on the amount of Input Tax Credits (ITC’s) they could claim for HST paid for certain energy costs, vehicle costs, meal and entertainment and telecommunication costs.  The ITC recapture rules apply to businesses with taxable supplies (including zero rated supplies) in excess of $10M. In an associated group, the $10M threshold is based on the aggregate taxable supplies of the associated group.

The rules were designed such that the ITC restrictions will be phased out over a period of 8 years, in accordance with the following schedule:

  • 100% ITC restriction for the period from July 1, 2010 to June 30, 2015
  • 75% ITC restriction for the period from July 1, 2015 to June 30, 2016 
  • 50% ITC restriction for the period from July 1, 2016 to June 30, 2017
  • 25% ITC restriction for the period from July 1, 2017 to June 30, 2018
  • 0% on or after July 1, 2018.

As indicated in the above schedule, the first part of the phase out will start this year from July 1, 2015 from which date onwards up to June 30, 2016 large businesses will now be able to claim an ITC of up to 25% for HST paid on the expenditures mentioned above. The schedule also outlines the remaining phase out periods up to July 1, 2018 at which time large business will be able to claim an ITC for 100% of the HST on the expenditures in question.

Should you have any questions, please feel free to contact Richard Rizzo, CPA, CA at 905-632-6400 extension 309.

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