Starting July 1, 2015, the recapture of the HST in Ontario on specified property and service costs1 incurred by large businesses2 will be reduced from 100% to 75%. The recapture of the provincial component of the HST (8%) has been in place since July 1, 2010.
The recapture rate will be reduced by 25% each year beginning on July 1st until 2018 when it will be completely phased out.
When completing the GST/HST return, the gross amount of all input tax credits (“ITC”) will continue to be included on line 1400. HST filers subject to recaptured ITCs should also continue to report their ITCs relating to specified property and services on line 1401; however, they should claim only 75% of this amount, which will be automatically calculated on line 1402 as a reduction of the ITC claim for the period.
Similar phase out rules are scheduled for large businesses that will allow them to claim ITCs (input tax refunds in Quebec) on specified property and service costs incurred in Quebec and Prince Edward Island, effective January 1, 2018 and April 1, 2018, respectively.
Clients have made errors in the past and have computed the recapture on both the federal and provincial portion of the HST; review your records to ensure you have not committed this error in the past.
1 Specified property and service costs includes the following:
- electricity, gas, steam and fuel (other than fuel for use in a propulsion engine) together with incidental delivery charges or regulatory fees;
- certain telecommunication services, other than certain supplies, including access to the Internet and toll-free telephone services such as 1-800 telephone services;
- food, beverages and entertainment, to the extent that they are already subject to the existing input tax credit (ITC) repayment requirements (generally 50%);
- qualifying motor vehicles (whether purchased or acquired by way of lease, licence or similar arrangement), together with parts and services acquired within 12 months of the vehicle’s acquisition or bringing into Ontario (e.g. acquisition and installation of a vehicle anti-theft system), other than parts and service for routine repair and maintenance; and
- fuel (other than diesel fuel) that is for the engine of a qualifying motor vehicle described above, even if the vehicle was acquired or brought into Ontario prior to July 1, 2010.
2 A large business is defined as a business where the value of taxable supplies3, other than supplies of financial services, made in Canada4 by the registrant, and by any person with whom it is associated, exceeds $10 million during its last taxation year.
3 Taxable supply: Includes a zero-rated supply and also includes supplies made for nil consideration, pursuant to a joint election made by specified members of a group of closely related corporations.
4 Made in Canada: Includes the value of all exports together with supplies deemed to be made outside of Canada.