As your small business grows, you will likely need to register for, charge, and remit the GST/HST if you have not already registered voluntarily. An important part of the GST/HST system is the ability to recover the taxes you paid on most of the purchases you make for your business. The taxes you recover are called input tax credits, or ITCs. At the end of your reporting period, you calculate the taxes you collected from your clients, subtract your ITCs, and remit only the net amount to the Canada Revenue Agency. Normally, ITCs can only be claimed on items you purchased after you register, but there are some cases where you may be eligible to claim an ITC for the GST/HST paid previously on inventory you had on hand at the time you became a registrant. The CRA considers that you bought the inventory at the time of your registration at its current fair market value, and you are entitled to an ITC reflecting the GST/HST that would have been paid on that value on that day. Fair market value is usually defined as the price a normally motivated buyer would pay to a normally motivated seller for something. It is your responsibility to establish a reasonable fair market value for your inventory and to document how you arrived at that value. The same reasoning applies to capital property and real property used in your business as well as to prepaid rent, royalties, or similar payments for property that relate to the period after you became a registrant. You cannot claim ITCs relative to services that were rendered prior to your registration. Maximizing your ITCs is an important aspect of cash flow management, especially for new registrants; you want to claim everything to which you are entitled.
2017-03-29 00:00:002017-03-29 00:00:00https://quickbooks.intuit.com/ca/resources/taxes/claim-input-credit-inventory-on-hand-gst-registrantTaxesEnglishLearn how to claim an input tax credit for inventory on hand when you register your business for the GST/HSThttps://quickbooks.intuit.com/ca/resources/ca_qrc/uploads/2017/06/accountant-discusses-input-tax-credit-with-gst-registrant.jpgClaim an Input Tax Credit for Inventory on Hand When You Become a GST Registrant
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