Simplified Method for Calculating ITCs and ITRs

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Small businesses and eligible public service bodies (PSBs) can use a simplified method for calculating input tax credits (ITCs) and input tax refunds (ITRs). This method does not affect the procedures for charging, collecting or reporting GST and QST.

Rebates for PSB
A similar method, called the simplified method for calculating rebates for PSBs, can be used by charities, qualifying non-profit organizations (NPOs) and PSBs.

The main advantage of using the simplified method is that the exact amount of the taxes for each invoice or supporting document does not have to be calculated. Only the amount of taxable purchases (including GST and QST) for which ITCs and ITRs can be claimed must be taken into account.

To use the simplified method for a given fiscal year, small businesses and public service bodies must meet all of the following requirements:

  • They are registrants.
  • Their taxable sales (including sales by associates) made worldwide for the previous fiscal year do not exceed $1 million (not including GST and QST). Sales of financial services, real property and goodwill are not included in calculating total sales.
  • If they start using the method in a quarter that is not the first quarter of their fiscal year, their total taxable sales for the previous quarter(s) of the current fiscal year do not exceed $1 million (not including GST and QST) under the GST and QST systems.
  • They are not a listed financial institution, such as a bank or an insurer.
  • Their taxable purchases made in Canada in the previous fiscal year do not exceed $4 million (including GST and QST) under the GST and QST systems. The $4 million limit does not include zero-rated purchases, but it does include purchases imported into Canada or brought into a participating province.
  • In the case of PSBs, they must expect that their total taxable purchases (excluding zero-rated purchases) made in the current fiscal year will not exceed $4 million (including GST and QST) under the GST and QST systems.

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