An August 20, 2024 Tax Court of Canada case reviewed whether a corporation could claim ITCs of $8,874 related to the purchase of two vehicles that were used by the corporation. One vehicle was purchased by the shareholder and the other was purchased by the shareholder and his spouse.

Taxpayer loses – To be eligible for an ITC, the corporation must meet all of the following conditions:

1. the corporation must have acquired the vehicles;
2. the GST/HST in respect of the vehicles must be payable or must have been paid by the corporation; and
3. the vehicles must have been acquired in the course of the corporation’s commercial activities.

The Court found no evidence that the corporation acquired either vehicle; the corporation’s name was not on the sales agreements, bill of sales, vehicle registrations or proof of insurance. In addition, there was no evidence of any trust, agency or assignment agreement. As such, criterion (a) was not met.

The Court also found that the corporation was not liable to pay consideration under the purchase agreement for either vehicle; therefore, GST/HST was not payable by the corporation. As such, criterion (b) was not met.

While the corporation argued that the vehicles were used or available for use by the corporation, the vehicles were not actually acquired in the course of the corporation’s commercial activities. As such, criterion (c) was not met.

While only failing one of the above criteria would be fatal to the claim, the corporation failed all three. The ITC was appropriately denied.

Action – Care should be afforded to acquire assets in the proper entity such that GST/HST can be recovered  as an input tax credit, if appropriate.