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GST/HST — input tax credits for GST incurred before registration

Xco, a movie production company, incurred $1 million of production expenses in British Columbia. The company's accountant had neglected to register Xco for GST/HST before these expenses were incurred.

The CRA assessed Xco to deny its claim for $50,000 of input tax credits (ITCs), since ITCs are available only to a person that is a "registrant" at the time the expenses are incurred. I was asked for assistance at this point.

I quickly identified that Xco had a way of claiming the ITCs. Xco had entered into an agreement, before it started incurring the expenses, to license the movie it was making. Using this fact, I was able to show that the legislation deemed Xco to be a "registrant" before it was actually registered for GST. As a result, Xco was entitled to the ITCs.

I prepared a Notice of Objection submission for Xco, analyzing the issue and explaining why it was entitled to the ITCs.

The CRA Appeals Officer reviewed the file, agreed with my submission and allowed the ITCs.

Problem vanished!

(2019)