Input Tax Credit Documentation

Randy Schwartz, Simon Douville, and Hubert Cadotte recently spoke at the Tax Executive Institute 2025 Annual Meeting in Ottawa on the challenges faced by businesses claiming input tax credits (ITC), and best practices to proactively protect ITC claims and defend ITC claims when under audit.

What the CRA Wants

The Canada Revenue Agency (CRA) has developed an ever evolving strategy for challenging ITC claims. At its most basic, the CRA demands highly detailed transaction data with supporting information documented in a specific form that is issued or signed by the supplier. More recently, we have seen CRA auditors adding a due diligence requirement that effectively requires ITC claimants to verify the bona fides of their suppliers; for example, confirming the supplier’s tax remittances before the claimant is entitled to claim its ITCs.

What Clients Need

It is important for taxpayers to distinguish between what the CRA wants and what they are required to obtain to support their ITC claims.  Part IX of the Excise Tax Act (ETA) and its regulations set out the specific information taxpayers are required to obtain but do not require that it be in a specific form.  The CRA’s mandate is to ensure that the taxpayer has obtained the prescribed information; this mandate does not include the power to require that the information take a specific form.

In reviewing the case law, it is clear that while obtaining the prescribed information is mandatory, there is no requirement that the information be provided in a single document of a particular form or a document signed or issued by the supplier.^[1]  Moreover, to claim ITCs, taxpayers are not required to obtain information beyond what is required by the ETA and regulations. Absent of a sham, taxpayers also have no obligation to perform additional due diligence with respect to their suppliers.^[2]  ITC claimants can best protect themselves in this regard by ensuring that the registration number they obtain from their supplier is valid.

What We Are Seeing In Practice

While CRA auditors may apply aggressively narrow interpretations of the ITC documentary requirements, taxpayers must nonetheless ensure they obtain and retain the proper supporting information. The information must be accurately retained by the taxpayer so that the taxpayer can prove that the tax was paid to the particular GST/HST registered supplier.  It is also important to ensure that the ITCs are claimed by the “recipient” of the supply as auditors will deny ITCs where a person other than the person liable to pay the consideration for the supply (e.g., a person assuming the accounts payable of another person) claims ITCs in respect of the supply.^[3]

During an audit, taxpayers should be aware that if they obtained and retained a reliable record of the prescribed information, they should challenge any attempt to deny their ITC claims.  Most recent court cases have supported taxpayers against the CRA’s overly restrictive interpretation of the ITC documentary requirements.^[4]  

^[1] Systematix Technology Consultants Inc. v. R., 2006 TCC 277, aff’d 2007 FCA 226; CFI Funding Trust v. The Queen, 2022 TCC 60; Fiera Foods Company v. The King, 2023 TCC 140.

^[2] Entrepôt Frigorifique International Inc. v. The King, 2024 TCC 78; link to our summary here.

^[3] Telus Communicaitons (Edmonton) Inc. v. R., 2008 TCC 5; aff’d 2009 FCA 49.

^[4] CFI Funding Trust v. R., 2022 TCC 60; see also Fiera Foods Company v. The King, 2023 TCC140.