A recent court case may have a significant impact on the way GST/HST registrants resolve GST/HST audits and examinations, confirming the general approach from the Canada Revenue Agency (“CRA”) is often overly strict. As you may know, registrants charge GST/HST on their sales and pay GST/HST on their purchases, with the difference being remitted to the CRA or eligible to claim back as a refund. If you have had the pleasure of dealing with CRA review, you will know that documentation is often one of the most prevalent issues under audit.
Documentation Requirements for Claiming Input Tax Credits
The Excise Tax Act (“ETA”) under Section 169 allows a registrant to claim Input Tax Credits (“ITC”) in its GST/HST return. However, a registrant must follow the general rules for claiming ITCs. In this blog, we will cover the documentary requirements to be fulfilled by a registrant to claim ITC.
As per Section 169(4) of the ETA, a registrant is mandated to obtain sufficient evidence in a prescribed form containing information enabling the amount of the input tax credit to be determined. The document should also include information prescribed under the Input Tax Credit Information (GST/HST) Regulations (“ITC Regulations”) which is discussed later in this article.
A supporting documentation to claim ITC can include an invoice, receipt, credit-card receipt, debit note, a book or ledger of account, a written contract or agreement, any record contained in a computerized or electronic retrieval or data storage system, and any other document validly issued or signed by a registrant in respect of a supply made by the registrant in respect of which there is tax paid or payable.
Court and CRA Commentary Regarding Acceptable Documentation
In a private technical interpretation, the Excise and GST/HST Ruling authorities clarified that there is no requirement in either Section 169(4) of the ETA or the ITC Regulations that the information is to be obtained in a single document or be obtained all at the same time. Accordingly, as long as the required information has been obtained in any manner prior to claiming the ITC, the taxpayer would generally meet the documentary requirement to claim ITC.
Further, the Tax Court of Canada (the “Court”) in CFI Funding Trust v. The Queen (the “Case”) held that an invoice issued by the supplier is not necessary to claim ITC and to satisfy the requirements of subsection 169(4) of the ETA and the ITC Regulations.
The case spoke about the GST/HST meeting held by the Canadian Bar Association Commodity Tax section in March 2005 on reverse invoicing. The CRA accepted that in certain circumstances, with the agreement of both parties and where there is sufficient information to verify the accuracy of the documentation, the recipient may prepare the documentation. However, the supplier is also required to have sufficient documentation to enable the CRA to determine the supplier’s liabilities and obligations for GST/HST.
The ITC documentary requirements would also be satisfied where there is no dispute between the parties to the transaction and the recipient obtains the missing information either by telephone or in writing and then transcribes the missing information onto the document provided by the supplier. If the missing information is provided in writing, the recipient should also retain that document, and the ITC information requirements may be found in more than one document as long as together, the documents meet all of the prescribed requirements.
The case concluded that the Regulations do not set out a general requirement for the supporting documentation to be issued or signed by the supplier. The definition of “supporting documentation” only requires the document to be issued or signed by the supplier where the documentation does not fit within one of the document types outlined in the definition of supporting documentation.
Summary
For the purposes of paragraph 169(4)(a) of the Act, the following information is prescribed information:
| Prescribed information on supporting document | Total amount paid or payable under $30 | Total amount paid or payable is $30 or more but less than $150 | Total amount paid or payable is $150 or more |
| Name of supplier/intermediary | Required | Required | Required |
| GST/HST Registration number of supplier / intermediary | Not Required | Required | Required |
| Date of the invoice/ Date on which tax is paid or payable | Required | Required | Required |
| Total amount paid or payable | Required | Required | Required |
| The amount of tax paid or payable | Not required | Required | Required |
| Tax rate (if the total amount including tax is mentioned) | Not required | Required | Required |
| Recipient’s name | Not required | Not required | Required |
| Terms of payment | Not required | Not required | Required |
| Description of each supply | Not required | Not required | Required |
GST/HST documentation requirements as set out in the ETA have many nuances, which are often not well communicated by CRA representatives. As there is limited opportunity to interact with CRA during a GST/HST audit or examination, it is advised to work with a professional experienced in this area. For assistance with GST/HST, contact us and ask to speak to a member of our HST team.
