Input VAT

Canada

Muhammad Arsal
@m-arsal

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1
Introduction and
Guide!
In this guide we're going to further
unravel the VAT system on Canada.

By looking at;
Input & Output VAT
Liability & Refund
Eligible ITCs
Restriction on Certain Expenses
Documentation
Time limits

Muhammad Arsal

VAT - Canada 2
Let the learning
begin!

Muhammad Arsal
@m-arsal

3
Input & Output VAT!
Output VAT:
When business charge VAT on their
sales of goods and services is called
Output VAT.
It is collected by business on behalf of
the government.

Input VAT:
Businesses incur costs when
purchasing goods and services from
other businesses, and they are also
required to pay VAT on these
purchases. This VAT is known as Input
VAT.

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VAT - Canada 4
Liability & Refund?!
VAT Liability:

Output VAT > Input VAT

VAT Refund:

Output VAT < Input VAT

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VAT - Canada 5
Input Tax Credits
(ITCs)

Muhammad Arsal
@m-arsal

6
What is this?!
Businesses that are registered for
GST/HST in Canada are generally
entitled to claim ITCs for the GST/HST
paid or payable on their purchases of
goods and services

ITCs are an important feature of the

VAT system as they help to prevent
the tax from becoming a burden on
businesses.

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Eligible ITCs:
GST/HST paid on business expenses by
the business

Examples:
Supplies purchased for resale
Rent and leasing expenses
Utilities and other services
Advertising and marketing expenses
Professional fees
Capital assets

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Restriction on
certain expenses!
There are certain expenses for which ITCs are
restricted or not allowed at all

Examples - Partial;
Entertainment and meal expenses - Only 50%
of GST/HST can be claimed on this expense.
Motor vehicles - Depends on its usage in
business activities.
Capital property - Depends on its usage in
business activities.
Capital assets - Depends on its usage in
business activities.

Examples - Full;
Personal or exempt supplies
Certain employee benefits
Memberships in clubs or associations
Fines or Penalties

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Documentations:
Businesses must maintain proper
documentation to support their
claims for ITCs. This includes;

Invoices and receipts

Supplier name and address
Description of the goods or services
purchased

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Time Limits!
General Rule:
ITCs can be claimed within 4 years
after the end of the reporting period
in which the GST/HST was paid or
became payable

The reporting period is usually a

monthly, quarterly, or annual period
based on the business's reporting
requirements.

Exceptions:
Capital Property
Input tax adjustments
Late filed returns
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 Author
Muhammad Arsal

ACCA with several years of

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