As a small business owner in Canada, you may be eligible to claim an input tax credit (ITC) if you register your company for GST/HST and you pay for goods and services for business use in your province. An input tax credit gives your company money back for paying GST/HST on goods or services related to commercial activities.
What the Input Tax Credit Covers
Imagine you pay for fuel for a fleet of trucks used to deliver your items to customers. The ITC in Canada reimburses the GST/HST for that commercial activity. You can also use the ITC for professional fees, travel expenses, and inventory expenses. These expenses must be reasonable in quality and cost in relation to your business.
How to Claim the ITC
You must keep accurate records to claim this credit on your annual taxes. Consider using computer software, such as QuickBooks Online, to track expenses with regards to the ITC. You must prove to the Canada Revenue Agency that your expenses fall under the category of a reasonable business use. If you’re a new GST/HST registrant, you cannot claim an input tax credit for purchases you made before you became a registrant.
If your small business has sales of less than $6 million, you can claim input tax credits within four years of your eligible expenses. To do so, you must maintain all the relevant documents, including invoices, receipts, and contracts. Computer software lets you maintain these records all in one place.
ITCs are just one way that knowing the tax laws helps your business. 4.3 million customers use QuickBooks. Join them today to help your business thrive for free.