As of July 1, 2018, the requirement to recapture a portion of the provincial component of the HST paid in Ontario on certain types of expenses has been eliminated. For the previous recapture period (July 1, 2017 to June 30, 2018), the Ontario recapture rate was 25%.
Under the recapture of input tax credits (RITC) requirements, “large businesses” are generally required to recapture the provincial portion of the HST paid (or a part thereof during the phase-out period) in relation to the following specified expenses:
- telecommunication services (excluding internet access and toll-free telephone services);
- meals and entertainment expenses;
- energy not used to manufacture goods for sale;
- licenced road vehicles under 3,000 kilograms (as well as associated parts and certain services); and
- fuel (other than diesel) for use in qualifying licenced road vehicles.
Generally, RITCs should be reported in the first reporting period in which the ITCs become available, or in the immediately following reporting period. ITCs generally become available when the tax is paid or becomes payable. GST/HST becomes payable by a recipient on the earlier of the day the consideration for the supply is paid and the day the consideration for the supply becomes due. The consideration, or part thereof, for a taxable supply is deemed to become due on the earliest of:
- the earlier of the day the supplier first issues an invoice in respect of the supply for that consideration or part and the date of that invoice;
- the day the supplier would have, but for an undue delay, issued an invoice in respect of the supply for that consideration or part; and
- the day the recipient is required to pay that consideration or part to the supplier pursuant to an agreement in writing.
As a result, where HST becomes payable by a large business in relation to specified expenses (as noted above) acquired in Ontario, no RITCs are generally required to be reported for invoices dated on or after July 1, 2018. Similarly, invoices dated between July 1, 2017 and June 30, 2018, in most cases, will remain subject to the 25% recapture rate.