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Ontario Recaptured ITCs — Phase-Out to be Postponed? 

Canadian Tax Adviser


May 21, 2013


John Bain and Ryan Fullarton
Toronto, Indirect Tax


Large businesses in Ontario may continue to see restricted HST input tax credits past the date they are supposed to be phased out. Although it was not mentioned as a possible measure in the 2013 Ontario budget, Ontario Minister of Finance Charles Sousa recently sent a request to federal Finance Minister Jim Flaherty asking to extend the application of the recaptured input tax credit (RITC) program by three years to 2018.

RITCs effectively deny input tax credits to large businesses (most financial institutions and businesses with $10 million or more in annual revenues for all entities in the group) for the Ontario provincial portion of the HST they pay on four types of commodities: energy, telecommunications, meals and entertainment expenses and motor vehicles under 3,000 kg. The program is in force in Ontario for expenses incurred until July 1, 2015, at which time input tax credits for the restricted supplies are scheduled to be gradually phased in over three years.


RITCs are imposed by the federal government at the request of the Ontario government under the terms of the HST agreement known as the Comprehensive Integrated Tax Coordination Agreement. While the current agreement allows for an early phase-out of the RITCs beginning in 2015, it does not allow for an extension. Like the rest of the HST, the RITC program is levied via federal legislation and regulations, and is administered by the CRA. Any extension of the program would require federal assent.


Ontario requests RITC extension
Ontario's request to extend the RITC was not well-received by the federal government. In response to a question in the House of Commons on May 2, Minister Flaherty indicated that the federal government would not amend the agreement with Ontario to extend the application of the RITC program.


For more information, contact your KPMG adviser.






Information is current to May 21, 2013. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500


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