GST/HST -> Vehicles and aircraft input tax credits for GST/HST

GST/HST input tax credits on purchase of passenger vehicles and aircraft

The amount of input tax credit (ITC) that can be claimed for the purchase of passenger vehicles and aircraft depends on

There is a maximum capital cost on which an ITC may be claimed for a passenger vehicle.  For 2001 and later years, this maximum is $30,000 (excluding sales taxes).  This limit applies to all types of business entities, and was not increased for 2008. 

See the CRA table of Vehicle Definitions on the Small Business page.

a.    Corporations and public service bodies, other than financial institutions

Excise Tax Act s. 199(2)

If the passenger vehicle or aircraft is acquired for use primarily in the commercial activities of the registrant, the ITC is 100% of the GST/HST paid, subject to the above capital cost limitation.  Otherwise, no ITC may be claimed.

b.    Partnerships and Individuals

Excise Tax Act s. 202(2), 202(4)

If the passenger vehicle or aircraft is acquired to be used all or substantially all in the commercial activities of the registrant, the ITC is 100% of the GST/HST paid, subject to the above capital cost limitation.  Otherwise, the ITC is based on the capital cost allowance (CCA) claim for the vehicle at the end of each year.  Once the CCA has been calculated for the vehicle, calculate your ITC as follows:

The interim rates will apply for taxation years that end after and include the day July 1, 2006.

Example:  a self-employed person purchases a passenger vehicle in 2007 for $32,000 + 6% GST = $33,920.  The vehicle will be used approximately 60% for business use, and 40% for personal use, so the ITC is based on the capital cost allowance for the vehicle at the end of each year.  The example below uses 60% business use in each year, where in reality it is not likely the % would be the same in each year, as it is based on actual business mileage (see Trip Log on the Small Business page).

The CCA rate for passenger vehicles is 30%, and the half-year rule applies, so the CCA for the first year is only 15% of the lesser of $30,000 or the purchase price.

Note that the input tax credit each year is based upon the GST/HST rate applicable during the tax year, not the GST/HST rate which applied when the vehicle was purchased.

Revised: December 10, 2009