The Canada Revenue Agency released earlier this week the GST/HST info Sheet GI-171 entitled “Phasing out of Recaptured Input Tax Credits in Ontario”. The info sheet explains how the reporting will have to be done within CRA GST/HST Netfile login page for large businesses effective for reporting periods starting on July 1, 2015. From July 1, 2015 to June 2016, the recapture rate will be at 75% . For period before July 1, 2015 and after June 2010, the recapture rate is 100%.
The following are 2 examples for the 100% recapture rate for 2 specified properties and services; cell phone monthly charges and meals & entertainment, incurred and reimbursed in June 2015. The profile setting within Advataxes for this corporation is a ratio of commercial activities of 100% and of course; “large businesses”. The expense before HST in both cases is 100$, so 13$ of HST paid in both cases.
For the period of July 2015 to June 2016 in the above example the cell phone monthly charge RITC would be:
$8 times 75% that would equal $6. The cell phone expense would be $106.
For the period of July 2015 to June 2016 in the above example the RITC for the meal expense would be:
$4 times 75% that would equal $3. The net meal expense would be $109.50.
So the bottom line is more revenue for large businesses on specified properties and services incurred in Ontario.
GST/HST Netfile requires that you input the recapture of input tax credits, on the line for “Ontario 75%” so it will calculate the effective RITC amount to be remitted to the CRA
The recapture rate is scheduled to be furthered reduced in Ontario, so it should be eliminated by 2018. Similar complexities exist for PEI and Quebec and will be discussed separately