The Canada Revenue Agency released in June 2015 the GST/HST Info Sheet GI-171, “Phasing out of Recaptured Input Tax Credits in Ontario”. The info sheet explains how the reporting have to be done within CRA GST/HST Netfile login page for large businesses effective for reporting periods starting on July 1, 2015. For periods before July 1, 2015 and after June 2010, the recapture rate is 100%. For periods starting on July 1, 2015 end ending on June 30 , 2016, the recapture rate is at 75%. For reporting periods starting on July 1, 2016 and ending in June 2017, the recapture rate is 50%.Simulation of this calculation can be performed at https://www.advataxes.ca/en/tax-calculator-for-travel-expenses.aspx for recapture rates applicable on the day the test is performed.
The following are two examples for the 50% recapture rate for two specified properties and services: cell phone monthly charges and meals & entertainment, incurred and reimbursed in July 2016. The profile setting within Advataxes for this corporation is a ratio of commercial activities of 100% and of course; “large businesses” for the GST status. The expense before HST in both cases is $100, so there is $13 of HST paid in both instances.
For the above example and for expenses in periods starting in July 2016 and ending in June 2017 the RITC for the meal expense would be:
$4 × 50% = $2
The net meal expense would be $108.50.
For the period of July 2016 to June 2017 in the above example the RITC for the cell phone monthly would be:
$8 × 50% = $4
The net cell phone expense would be $104.
So the bottom line is more revenue for large businesses on specified properties and services incurred in Ontario starting on July 1, 2016.
GST/HST Netfile requires that you input the recapture of input tax credits on the line for “Ontario 50%” so it will calculate the effective RITC amount to be remitted to the CRA. The recapture rate is scheduled to be further reduced in Ontario, so it should be eliminated by 2018. To some extent, similar rules exist in Prince Edward Island for the HST and in Quebec for the QST.