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With the recapture of input tax credit (RITC) requirements for the provincial component of the HST paid on certain categories of expense being eliminated in Ontario on July 1, 2018, several clients have asked us about the transitional rules for the final stage of the phase-out. As in the sample below, a common concern is how to report any required recapture for utility costs which straddle the effective date of the change.
RITC Phase-out in Ontario
Question: We know that the RITC requirements in Ontario are coming to an end on July 1, 2018, but what do we do about our hydro bill for the period that includes that date? We currently report recapture for 25% of the provincial component of the HST paid on our invoices for electricity.
Answer: For a utility invoice covering a period that includes July 1 of this year, the reporting of RITCs is generally only required if the invoice is dated prior to July 1, 2018. Invoices for utilities issued and dated on or after July 1, 2018 are not subject to the RITC requirements. This is attributable to the fact that the transitional rules are based on when an input tax credit (ITC) first becomes available to the recipient of the supply, which in turn depends on when the tax is paid or payable under the timing of liability rules in the Excise Tax Act. This is most often the invoice date, but could be an earlier date, such as the day the supplier first issues the invoice, the day the tax is actually paid, or a date specified under a written agreement for the supply.
For further information on the RITC phase-out in Ontario, please see “Ontario Recapture of Input Tax Credits Rate Drops to 25%”, which can be found in the Ryan Sales Tax Review, October 2017, Volume XXVIII, Issue 3, available at: Ryan Sales Tax Review | October 2017.
Have a different question? Call the Ryan TaxDirectTM line at 1.800.667.1600 or visit: Ryan Canada TaxDirect.