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.
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;
- photocopy machines;
- chairs, tables, sofas, beds, television sets and other goods used to furnish hotel rooms, waiting rooms and convention facilities.
If you use 90% or more of a real property or more than 50% of a personal property for commercial activities, you can generally claim ITCs and ITRs for the full amount of the GST and QST you paid on the property.
The table below provides a checklist 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 and QST.
|Capital property||Percentage of use in commercial activities||All registrants1||Individuals who are registrants2||Public service bodies|
|Personal property||≤ 50%||None||None||None|
|Real property||≤ 10%||None||None||None|
|> 10% to ≤ 50%||% of use||% of use3||None4|
|> 50% to < 90%||% of use||% of use||100%4|
|Passenger vehicles5 and aircraft||≤ 10%||None||None||None|
|> 10% à ≤ 50%||None||Based on CCA6||None|
|> 50% à < 90%||100%||Based on CCA6||100%|
- 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 or the taxes calculated on $30,000 (the capital cost threshold under the Income Tax Act and the Taxation Act).
- ITC = CCA × 5/105; ITR = CCA × 9.975/109.975
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|
|ITC claimed ($25,000 × 60%)||$15,000|
|ITR claimed ($49,875 × 60%)||$29,925|
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 more than 50% of the time in your commercial activities.
|Cost of computer||$4,000|
|GST ($4,000 × 5%)||+ $200|
|QST ($4,000 × 9.975%)||+ $399|