Capital Property

Capital property is generally capital property as defined for income tax purposes. It includes depreciable property for which capital cost allowance (CCA) can be claimed as well as non-depreciable property whose disposition (by way of sale or otherwise) results in a capital gain or capital loss.

For more information about capital cost allowance, see guide IN-155-V, Business and Professional Income.

End of note

Capital property includes real property such as land or a building as well as personal property such as machinery used by a business in its commercial activities. Other examples of capital property are:

refrigerators, ovens and other appliances
computers
photocopy machines
chairs, tables, sofas, beds, television sets and other goods used to furnish hotel rooms, waiting rooms and convention facilities

Property included in certain classes under Schedule II to the Income Tax Regulations (for GST purposes) and in certain classes under Schedule B to the Regulation respecting the Taxation Act (for QST purposes) is not considered capital property.

This includes property in the following classes:

class 12 (for example, chinaware, cutlery and other tableware that costs less than $500)
class 14 (certain patents, franchises, concessions or licences for a limited period)
class 44 (patents, or a right to use patented information for a limited or unlimited period)
class 14.1 (certain property related to a business, such as goodwill and incorporeal capital property) since January 1, 2017

To claim an input tax credit (ITC) and an input tax refund (ITR) for property in these classes, follow the rules that apply to operating expenses.

End of note

Percentage of use in commercial activities

If you use all or substantially all (90% or more) of a real property for commercial activities, you can generally claim ITCs and ITRs for the full amount of the GST/HST and QST you paid on the property. You can also claim ITCs and ITRs for the full amount of GST/HST and QST you paid on personal property you used primarily (more than 50%) for commercial activities.

The table below provides an overview of the rules for claiming ITCs and ITRs on capital property. Please note that special rules apply to aircraft and passenger vehicles acquired by registrants that are partnerships or individuals.

If you increase the percentage of commercial use of real property or personal property, you may be entitled to an additional ITC or ITR. If you reduce the percentage, you may have to remit GST/HST and QST.

Proportion of taxes that can be claimed as ITCs and ITRs on capital property
Capital property	Percentage of use in commercial activities	Proportion of taxes that can be claimed as ITCs and ITRs – All registrantsNote: Under both the GST and QST systems, financial institutions can claim ITCs and ITRs based on the percentage of the capital property's use in commercial activities.	Proportion of taxes that can be claimed as ITCs and ITRs –Individuals who are registrantsNote: With respect to purchases of passenger vehicles and aircraft, partnerships must follow the rules that apply to individuals.	Proportion of taxes that can be claimed as ITCs and ITRs –Public service bodies that are registrants
Personal property (other than passenger vehicles and aircraft) (e.g. chairs, tablets, desks, trailers)	≤ 50%	None	None	None
	> 50%	100%	100%	100%
Real property	≤ 10%	None	None	None
	> 10% to ≤ 50%	% of use	% of useNote: Individuals who are registrants cannot claim ITCs or ITRs if the percentage of use of the capital property for personal purposes is higher than 50%.	NoneNote: A public service body may elect to have the rules governing all registrants apply.
	> 50% to < 90%	% of use	% of use	100%Note: A public service body may elect to have the rules governing all registrants apply.
	≥ 90%	100%	100%	100%
Passenger vehiclesNote: The portion of the cost of passenger vehicles giving entitlement to an ITC and an ITR is limited to the lesser of the taxes paid on the acquisition of the vehicle and the taxes calculated on the capital cost threshold under the Income Tax Act and the Taxation Act. If a passenger vehicle is considered a zero-emission vehicle under either of these laws, the taxes are calculated on the higher capital cost. and aircraft	≤ 10%	None	None	None
	> 10% à ≤ 50%	None	Based on CCANote: ITC = CCA × 5/105; ITR = CCA × 9.975/109.975	None
	> 50% à < 90%	100%	Based on CCANote: ITC = CCA × 5/105; ITR = CCA × 9.975/109.975	100%
	≥ 90%	100%	100%	100%

Notes

Under both the GST and QST systems, financial institutions can claim ITCs and ITRs based on the percentage of the capital property's use in commercial activities.
With respect to purchases of passenger vehicles and aircraft, partnerships must follow the rules that apply to individuals.
Individuals who are registrants cannot claim ITCs or ITRs if the percentage of use of the capital property for personal purposes is higher than 50%.
A public service body may elect to have the rules governing all registrants apply.
The portion of the cost of passenger vehicles giving entitlement to an ITC and an ITR is limited to the lesser of the taxes paid on the acquisition of the vehicle and the taxes calculated on the capital cost threshold under the Income Tax Act and the Taxation Act. If a passenger vehicle is considered a zero-emission vehicle under either of these laws, the taxes are calculated on the higher capital cost.
ITC = CCA × 5/105; ITR = CCA × 9.975/109.975

Sample calculation: 60% commercial use of real property

You operate a business that is not a public service body (PSB). You purchase a building (real property) and plan to use 60% of it in your commercial activities. You can claim an ITC and an ITR equal to 60% of the GST and QST you paid on the building, since less than 90% of the real property is to be used in commercial activities.

Cost of building	$500,000
GST ($500,000 × 5%)	+ $25,000
QST ($500,000 × 9.975%)	+ $49,875
Total	= $574,875
ITC claimed ($25,000 × 60%)	$15,000
ITR claimed ($49,875 × 60%)	$29,925

Sample calculation: 60% commercial use of personal property

You purchase a computer (personal property) for your business that you intend to use 60% of the time in your commercial activities. You can claim an ITC and an ITR equal to 100% of the GST and QST you paid on the computer, since the property is to be used primarily (more than 50%) in your commercial activities.

Cost of computer	$4,000
GST ($4,000 × 5%)	+ $200
QST ($4,000 × 9.975%)	+ $399
Total	= $4,599
ITC claimed	$200
ITR claimed	$399