Did you know the most significant advantage for registering for GST/HST account is that you can claim your Input Tax Credit for sale tax paid on things purchased to produce goods and services? If you don't know much about it, that's ok, as many local companies like ours in Mississauga are helping out to understand this whole process and how you can get benefits from these credits. So don't sweat it! You can contact Yogi & Associates as our professionals will guide you about ITC's and how to claim them on your tax return in Canada.
What are The Input Tax Credits?
A portion of the total of GST/HST you pay on your business expenses is known as Input Tax Credits (ITCs). If your company pays GST/HST to Canada Revenue Agency, you may be able to claim some parts of these taxes as credits and lower your total taxes due.
How do ITC's Work?
To claim IT'Cs, you must be registered for GST/HST. It would help keep an eye on any GST/HST expenses whenever you make business-related transactions to report and claim your Input Tax Credits.
Keep all your associated receipts, just like you would with any other expenditures claim, so you can back up your claims if necessary. ITCs must be claimed within four years of the deadline of the original return. Businesses earning more than $6 million annually will have a maximum two-year deadline.
If you want to learn about GST/HST registration, you can go into our article by clicking GST/HST registration
Eligible Expenses for Input Tax Credits:
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It is essential to understand which expenses qualify to claim ITC, and if you fail to, the CRA will disqualify you from claiming ITC's. This can lead to a considerable tax burden you can't afford.
According to the CRA, the following are some of the expenses for which you can claim Input Tax Credits:
1. Qualifying Business Expenses:
- Equipment rent
- Travel costs such as shipments, cargo, and deliveries.
- Office costs such as mailing, computer, and stationery.
- Traveling includes meals, vehicles rent, flights, entertainment.
- Home office expenditures, but only if this is your primary place for business.
- Commercial rent
2. Qualifying Capital Expense:
- Majority of capital property
- Furniture and equipment
- Vehicles and machines
- Addition to capital property
Non-Eligible to Qualify for ITC's:
You cannot claim ITCs on products you bought for personal use and enjoyment. For example, you cannot claim ITCs on the following items and expenses:
- Purchased or imported taxable goods and services to supply exempt goods and services.
- Some investment property.
- Membership fees or dues to any club whose primary aim is to provide dining and sports facilities unless you purchase the membership to resale in your business.
Let's Wrap it up!
Businesses need to be qualified to claim ITCs. Otherwise, your claims can be rejected by the CRA, which will lead to a huge tax burden on your company that you won't be able to afford. We know it isn't easy to collect valid documents on your own to provide to the CRA for claiming ITCs. If you fail to provide the specific documents to the CRA, they will likely reject your claims.
We know it can be a terrifying moment for you. But you don't have to worry; Yogi & Associates can assess your situation recommend the best possible ways to qualify for Input Tax Credits. Our experts will help you deal with the challenges you face to be eligible for credits. We will also provide you with the best opportunities to resolve your circumstances. So feel free to contact our company located in Mississauga.