12 June 2013

A reminder: what you need to do to secure your ITCs

The Canada Revenue Agency is tightening their audit routines for determining how much can be allowed for input tax credit claims. Here is a refresher about the rules you must follow when you are registered to collect GST/HST.

What has to appear on invoices

The regulations presume that the basic information must appear on invoices that are supplied for a transaction, and must be captured on the registrant's books and records (essentially your accounting system). The information that must be supplied depends on the value of the invoice:

Information required Invoice less than CAD 30 Invoice = CAD 30.00 - 149.99 Invoice = CAD 150 or more
Your business or trading name, or your intermediary's name (registrant with whom you have an agreement to help you supply your goods or services) Y Y Y
Invoice date Y Y Y
Total amount paid or payable Y Y Y
An indication of the total amount of GST/HST charged or that the amount paid or payable for each taxable supply (other than zero-rated supplies) includes the GST/HST at the applicable rate N Y Y
When you supply items taxable at the GST rate and the HST rate, an indication of which items are taxed at the GST rate and which are taxed at the HST rate N Y Y
Your business number or your intermediary's business number (registrant with whom you have an agreement to help you supply your goods or services) N Y Y
The buyer's name or trading name or the name of their authorized agent or representative N N Y
A brief description of the goods or services N N Y
Terms of payment N N Y

Most accounting systems will capture the above information on invoices that they generate.

Circumstances where no invoice is supplied 

Certain exceptions are allowed with respect to the invoice requirement in the case of:

  • unvouchered cash payments, 
  • computerized books and records, 
  • contractual arrangements (such as leases), 
  • reimbursement of meal and entertainment expenses, 
  • meal and entertainment expenses allowances, 
  • reimbursement of expenses (other than meal and entertainment expenses), 
  • allowances (other than for meal and entertainment expenses), and 
  • taxi or limousine fares 
 There are some minor variations of the requirements for each of these categories, but the following apply to all:

  • name or trading name of the supplier (or employer with respect to reimbursements and allowances)
  • business number of the above
  • date or reporting period for the transaction
  • amount paid, as well as the amount of GST/HST
  • the type of supply
 This area is where many businesses may get tripped up:
  • are business numbers of suppliers being recorded on the books and records?
  • are they being otherwise supplied on the execution of contractual arrangements?
  • are all business numbers supplied being verified through the CRA GST/HST registry (and the QST registry, if you are registered for Quebec Sales Tax)?
  • would it be a good idea for the employer to print its business number on expense reimbursement forms?
  • do reimbursement claims distinguish between the different provinces with respect to the travel that has occurred (which may impact on any recapture of ITCs)?
  • does the same go for any allowances that are paid?
  • are the requirements relating to the use of corporate credit cards being properly observed?
The above is just a shortlist of the questions that need to be examined. The CRA website has many other topics that should be taken into account as well.

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