Stop Guessing, Start Claiming: Your Guide to CRA Documentation for Input Tax Credits (ITCs)
As a small business owner in Canada, you know that keeping your books in order is crucial. One way you can save money is through the Goods and Services Tax / Harmonized Sales Tax (GST/HST) system, specifically by claiming Input Tax Credits (ITCs).
ITCs allow you to recover the GST/HST paid on purchases and expenses you use in your commercial activities. But here's the catch: the Canada Revenue Agency (CRA) has specific, tiered rules on what information must be on your receipts or invoices to successfully claim these credits.
If your documentation is missing key details, or missing altogether, the CRA can deny your claim, costing your business money.
Here is a simple breakdown of the documentation requirements that every Canadian business owner needs to follow.
🧾 The Golden Rule: Documentation is non-negotiable
Before diving into the dollar amounts, remember that any document you use—whether it's an invoice or a receipt, must contain enough information to allow you to clearly determine the amount of the ITC you are claiming.
The specific documentation required depends on the total amount paid or payable for the supply (before any tax)
Tiered Requirements: What to Look For Based on Cost
The CRA divides your business purchases into three categories, each with escalating documentation requirements.
Tier 1: Small Purchases (Total Amount Less than $30)
For everyday small expenses, the requirements are minimal, but still mandatory:
What the Document Must Include
Why It Matters
1. Supplier's Name
It must clearly show who you purchased the goods/services from (or their trade name).
2. Date
The date the invoice was issued or the tax was paid/payable.
3. Total Amount Paid or Payable
The final cost of the purchase.
In short: A standard cash register receipt or gas station receipt usually covers this, as long as it includes the store name, date, and total.
Tier 2: Mid-Range Purchases ($30 up to $150)
For most supplies, once the cost hits $30 or more, you need to step up your documentation game. You must include all the requirements from Tier 1, PLUS:
What the Document Must Include
Why It Matters
4. Supplier's GST/HST Registration Number
This is critical. Without the supplier's GST/HST number, you cannot prove the tax was charged by a registered supplier and your ITC will be denied.
5. Tax Status Indication (If Applicable)
If the invoice includes a mix of taxable and exempt items, the document must clearly indicate which is which.
Tier 3: Larger Purchases ($150 and Above)
For this tier the CRA requires that you must meet all the requirements for Tier 1 and 2, PLUS:
What the Document Must Include
Why It Matters
6. Your Name (The Recipient)
The document must identify your business as the purchaser
7. Terms of Payment
Due date, method of payment etc
8. Brief Description of Property/Service
A clear, detailed line-item description of what was purchased. "Office supplies" is vague; "5 boxes of letterhead, 1 printer cartridge" is better.
A Note on ITCs and Documentation
It is important to understand that simply having a receipt is not enough if the receipt is missing the prescribed information for its dollar amount tier.
The supplier's GST/HST number is the single most common reason ITCs are denied in audits for purchases over $30. Make it a habit to check for this on every invoice.
Even for purchases under $30, while the tax doesn't have to be shown separately, your documentation must still enable you (and the CRA) to determine the amount of tax you paid to claim the ITC. Think about a receipt from a restaurant for example. You may have the payment slip showing how much you paid using your credit card, or the POS receipt from your server but neither of these on their own provides sufficient information. You probably left a tip for your server, and that tip is not taxed. So where you may think “just figure it out” it’s not necessarily that simple.
🔑 Your Small Business Action Plan
To ensure every ITC claim is bulletproof, adopt these practices immediately:
Implement a Two-Part Check: When reviewing invoices over $30, check for the Supplier's GST/HST number. When reviewing invoices over $150, check for your business name and a detailed description - if you work with a bookkeeper, they should be serving as part of this checking process already. If they aren’t it might be time to consider a new option.
Go Digital: Scan and organize all your receipts. Use accounting software that can store and categorize these documents, linking them directly to your transactions. Our favourite combination for this is QBO and Dext.
Train Your Staff: If employees make business purchases, they must be instructed to only accept invoices or receipts that contain the necessary information, especially the supplier's GST/HST number. They should also be trained to make the appropriate notations for expense claims according to the CRA and company processes.
Retention is Key: The CRA requires you to keep all supporting documents for your business for six years after the end of the last tax year to which they relate.
By understanding these simple dollar thresholds and checking your invoices against the CRA's requirements, you can maximize your ITC recovery and protect your business from costly audit adjustments.