Input tax credit (ITC)

If a buyer that is a GST/HST registrant pays GST/HST when buying the assets of a business, ask whether it can claim ITCs. The CRA says registrants can generally claim ITCs on their return to the extent they use, consume or supply the purchases in their commercial activities, so check how the buyer will use each asset. The CRA also publishes form GST44, an election to not have GST/HST apply to the sale of a business or part of a business; see the section 167 election.

What the Act says

Section 169(1) of the Excise Tax Act applies where a person acquires or imports property or a service, or brings it into a participating province, and, during a reporting period in which the person is a registrant, tax in respect of the supply becomes payable by the person or is paid without having become payable. It is subject to the rest of Part IX, so read the section for the conditions and limits.

Where provinces differ

The ITC recovers GST/HST. In Quebec, the CRA says, Revenu Québec generally administers the GST/HST, and the Quebec Sales Tax (QST) is a separate tax. In a non-participating province such as Manitoba, the CRA’s examples show provincial sales tax charged apart from the GST. Ask the province’s tax authority how any provincial tax is treated. For the deal side, see GST/HST on a business sale.