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Can full GST claim be returned for a farm truck?

By Lloyd Lindsay |

Mike asked:

We have purchased a truck on our farm, a new four-door 3/4 ton 4x4 diesel. The primary purpose is for pulling a livestock trailer. Can we claim the full GST back? Can we claim the GST back on the current quarterly claim or do we need to write down the GST as we write down the CCA starting with our 2011 tax return?

Lloyd Lindsay answered:

For GST/HST purposes your new truck is a “Capital Personal Property” and the “Primary Use” rule applies.

Primary Use Rule:

  • If you use the capital personal property primarily (more than 50 per cent) in your commercial activities, you can claim a full ITC (the GST you paid on your purchase).
  • If you use the capital personal property 50 per cent or less in your commercial activities, you cannot claim an ITC.

You mentioned that the primary purpose is to pull a livestock trailer. So it appears that you can recover the full GST you paid on your truck. However, your truck might be a “Passenger Vehicle” and additional rules might apply.

Passenger Vehicle:

Generally, this term includes most automobiles, but it excludes the following:

  1. Vans or pickup trucks which are used primarily (more than 50 per cent) for transporting goods or equipment in the course gaining or producing income, and
  2. Vans or pickup trucks the use of which are all or substantially all (more than 90 per cent) for transporting goods, equipment or passengers in the course of gaining or producing income.

The first exclusion probably applies to you if you are not transporting passengers for a fee. Corporations follow the primary use rule mentioned above to determine their ITCs for passenger vehicles.

For Individuals and Partnerships, the rules for Passenger Vehicles are different. The following information is taken from a Canada Revenue Agency Guide:

“Individuals and partnerships usually claim ITCs for passenger vehicles and aircraft based on the capital cost allowance (CCA) claimed for income tax purposes. If the use in commercial activities is 10 per cent or less, you cannot claim any ITC. If the use in commercial activities is 90 per cent or more, you can claim a full ITC.

You usually calculate your CCA for income tax purposes at the end of your fiscal year. Once you have calculated your CCA, calculate your ITC by using one or more of the following formulas:

  • CCA Г— 5/105, if you paid the GST on the purchase.
  • The applicable formula if you paid the HST on the purchase:
  • CCA Г— 12/112 in British Columbia;
  • CCA Г— 15/115 in Nova Scotia; or
  • CCA Г— 13/113 in the remaining participating provinces.”

Determining whether your truck is or is not a passenger vehicle as defined under the Income Tax Act (that’s right, the Income Tax Act) is your first step. Once you make that determination, then you can apply the appropriate rules for the category of your vehicle.

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