When CRA Denies Your Input Tax Credits: How to Fight Back – A Complete Guide by a Montreal CPA Firm Near You

Introduction

For many businesses, Input Tax Credits (ITCs) represent tens of thousands of dollars in recoverable GST/HST each year. When CRA suddenly denies ITCs during an audit—whether due to missing invoices, minor formatting issues, or incorrect assumptions—the financial impact can be devastating. The good news: most denied ITCs can be restored when the right evidence, legal arguments, and structured appeal strategy are provided. This guide explains why CRA denies ITCs, how to respond, what documentation CRA requires, and how to win your ITC dispute through objection or Tax Court appeal.

Legal and Regulatory Framework

ITC claims are governed by the Excise Tax Act, which requires that businesses:

• Acquire goods/services for commercial use

• Have proper documentation supporting ITC claims

• Ensure the supplier charged GST/HST correctly

• Maintain complete records for at least six years
  CRA has the authority to deny ITCs during audits if documentation is missing, incomplete, or unclear. Businesses have 90 days from the date of a GST/HST reassessment to file a Notice of Objection. If CRA denies the objection, the appeal can proceed to the Tax Court of Canada.

Key Court Decisions

In Precision Gutters Ltd. v. Canada, the court upheld CRA’s denial of ITCs because invoices lacked required GST/HST details, proving that incomplete documentation is fatal. In Rona Inc. v. Canada, taxpayers succeeded because they provided strong, organized evidence refuting CRA assumptions. In Guyoil v. Canada, the Court confirmed that CRA cannot arbitrarily deny ITCs when proper documentation exists. These cases show that documentation determines success.

Why CRA Denies ITCs

CRA often denies ITCs for:

• Missing supplier invoices

• Invoices without GST/HST registration numbers

• Incorrect or incomplete invoice details

• No proof of payment

• Personal or mixed-use expenses

• Supplier considered non-compliant by CRA

• Cash transactions without receipts

• E-commerce expenses lacking merchant processor statements

• Real estate ITCs misapplied

• Vehicle expenses without proper logs
  Many denials occur simply because documentation is incomplete—not because the expenses were invalid.

Mandatory Information Required on Invoices

To be eligible for ITCs, invoices MUST include:

• Supplier name

• Supplier GST/HST registration number

• Invoice date

• Description of goods/services

• Amount paid

• GST/HST breakdown

• Business address
  Missing or vague documentation is one of the top reasons CRA denies ITCs.

How to Fight Back When CRA Denies Your ITCs

1. Rebuild the Documentation File

Collect: supplier invoices, proof of payment (bank statements), contracts, receipts, merchant processor reports (PayPal, Stripe, Square), email confirmations, and purchase orders.

2. Correct Invoice Deficiencies

If the invoice is missing small details, request corrected invoices from suppliers. CRA accepts amended invoices.

3. Draft a Strong Rebuttal to the Auditor

Address each denied ITC individually. Explain the business purpose of the expense and attach documentation.

4. File a Notice of Objection (Within 90 Days)

Your objection must include:

• List of each denied ITC

• Supporting documents for each item

• Legal references under the Excise Tax Act

• Case law showing CRA must accept valid documentation

5. Provide Additional Evidence During Appeals Review

CRA Appeals often accepts documentation the auditor ignored.

6. Escalate to Tax Court (If Needed)

Tax Court frequently overturns unreasonable ITC denials—especially when documentation is strong.

Documentation That Strengthens an ITC Appeal

• Properly formatted invoices

• Bank or credit card statements proving payment

• Contracts or service agreements

• Merchant processor summaries

• E-commerce platform reports (Shopify, Amazon, Stripe)

• Shipping/purchase confirmations

• Mileage logs for vehicle-related ITCs

• Real estate closing documents
  A complete package increases your chances of reversing CRA’s decision.

Common Auditor Errors We Regularly See

CRA often denies ITCs incorrectly due to:

• Misinterpreting vendor invoices

• Assuming expenses are personal

• Treating internal transfers as sales

• Ignoring zero-rated transactions

• Misunderstanding place-of-supply rules

• Denying ITCs due to minor formatting issues
  These errors can be overturned through Objection or Appeals review.

When the Voluntary Disclosures Program (VDP) Applies

If your ITC issues stem from years of incorrect GST filings or unreported sales (and CRA has NOT yet contacted you), VDP may eliminate penalties and reduce interest.

Consequences of Not Challenging Denied ITCs

• Overstated GST/HST balances

• Unnecessary penalties

• Daily compounded interest

• Increased audit scrutiny

• GST/HST collections enforcement

• Possible director’s liability
  Doing nothing is extremely costly.

Mackisen Strategy

At Mackisen CPA Montreal, we rebuild ITC documentation files, challenge CRA assumptions line by line, prepare strong Notices of Objection, cite case law, negotiate with CRA Appeals, reconstruct missing receipts, reconcile merchant accounts, and escalate to Tax Court when necessary. Our structured approach regularly overturns denied ITCs.

Real Client Experience

A Montreal contractor recovered $58,000 in ITCs after we corrected invoice formats and added proof of payment. An e-commerce business reversed a GST reassessment by reconciling Shopify and PayPal reports. A landlord recovered real estate ITCs after CRA misapplied the rules. A consultant eliminated gross negligence penalties tied to denied ITCs after we provided corrected documentation.

Common Questions

Can CRA deny ITCs for minor mistakes? Yes—but Appeals often reverses. Do I need to pay denied ITCs immediately? Yes—GST/HST objections do not pause collections. Can invoices be corrected after an audit? Yes—CRA accepts amended invoices. Should I hire a CPA? Strongly recommended for ITC disputes.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps businesses restore denied ITCs through strong documentation, aggressive dispute strategies, and expert representation.