Simplified Method for Calculating ITCs and ITRs

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Small businesses and eligible public service bodies 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.

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 total annual taxable supplies (including supplies by associates) made worldwide for the previous fiscal year do not exceed $1 million. GST and QST, supplies of financial services, or sales of real property or goodwill must not be 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 supplies for the previous quarter(s) of the current fiscal year do not exceed $1 million. GST and QST must not be included.
  • They are not a listed financial institution, such as a bank or an insurer.
  • Their total taxable purchases (excluding zero-rated purchases) in Canada for the previous fiscal year do not exceed $4 million, including GST and QST.
  • In the case of public service bodies, 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.
Rebates for public service bodies

A similar method, called the simplified method for calculating rebates for public service bodies, can be used by charities, qualifying non-profit organizations (NPOs) and other public service bodies.

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