The input tax credit. An essential consideration for any corporation. New to small business? Let us explain what this is…
It’s GST/HST you’ve paid (goods/services/business expenses) – which counts against GST/HST you’ve collected from customers. Input tax credits need to be tallied up in a similar way to how you’ve kept track of the tax you’ve collected. You do some quick math, and you’ll have a net amount of tax that you’ll be required to remit to the CRA on a quarterly or annual basis (depending on what schedule they happen to have you on).
Your 15 digit GST/HST number (123456789RT0001) must be shown on all invoices, receipts, or other documents you use to invoice customers. It will now show up on all your invoices. This is important, as the CRA will not honour your client’s Input Tax Credit without your business number on the invoice (that wouldn’t help any of your customers who are also claiming ITCs).
So here’s a few tips if you’re starting a business and want to ensure you’re getting ITCs right:
- Invest in a good invoicing and estimating platform. Web based softwares have a tendency to save time and money. Freshbooks and Less Accounting are great starts.
- Ensure your GST/HST number is on every single invoice you generate. If you don’t do this, it will come back to haunt you.
- Ensure that the GST/HST number is indicated on every invoice you receive from a supplier or a service provider.
Questions? Contact us or Request a consultation.