According to the Canada Revenue Agency ("CRA"), the Canadian tax authority for goods and services tax ("GST") and harmonized sales tax ("HST"), a name is important. A rose by any other name does not claim input tax credits ("ITCs"). You have to know your client/customer's name.
One of the top GST/HST audit issues and reason for disallowing ITCs is the name of a supplier or a recipient on an invoice does not match the CRA's records. A person is able to claim input tax credits if they are registered for GST/HST purposes and are engaged in commercial activities and they pay GST/HST to a supplier for goods and/or services. When the CRA conducts an audit, they may disallow ITCs claimed by the person and issue an assessment for the amount claimed as ITCs, penalties and interest.
The CRA is a stickler for details and the names on invoices must match a GST/HST registration of the supplier (seller/vendor) AND the name of a recipient (the buyer/person responsible for paying the invoice) claiming an ITC. If the name on the supporting documentation does not match, the CRA regularly takes the position that the Input Tax Credit Information Regulations have not been satisfied and disallows the ITCs that have been claimed.
The Input Tax Credit Information Regulations require that the supporting documentation (invoice, receipt, credit card receipt, debit note, book/ledger account, written contract/agreement or other document) contain, in addition to other requirements, the following information:
(1) the name of the supplier or the intermediary in respect of the supply, or the name under which the supplier or the intermediary does business;
(2) the supplier's GST/HST registration number (if the consideration for the supply exceeds $CDN 30); and
(3) the recipient's name, the name under which the recipient does business or the name of the recipient's duly authorized agent or representative (if the consideration for the supply exceeds $CDN 150).
If the supplier's name does not match the name on file with the CRA for the GST/HST registration number, then the CRA may disallow the ITCs claimed by the recipient. The recipient is obligated to ensure that the supplier has provided a valid GST/HST registration number. The recipient may check GST/HST numbers using a CRA verification tool. You must enter both the GST/HST number on the invoice and the supplier's name. If the GST/HST registration number and name do not match the CRA's database, you will be informed and should go back to the supplier to get the correct name.
Problems sometimes arise with numbered companies that "do business as" or under a different name (e.g., Bob's Place). Sometimes the legal name of a company, which is on the articles of incorporation, is different than a trade name. If the supplier has not given the CRA the "doing business as" or trade name, there can be a problem claiming the ITCs.
Similarly, if supporting documentation used by a recipient who claimed the ITCs does not contain the correct name, the ITCs may be disallowed. We have seen many cases where the CRA disallows an ITC, which is claimed by a registrant who applied for a GST/HST registration number (only registrants can claim ITCs). Sometimes, the name does not match the GST/HST registration number and the CRA disallows the ITCs. The person claiming the ITCs has the obligation to ensure that the paperwork has the correct name. If the name on an invoice is not correct, the recipient should require the supplier to correct the invoice.
The CRA requires names to match so that one company does not claim ITCs of other companies. For example, if an individual has more than one company, and each company claims ITCs for all the invoices of the corporate group, there would be a tax loss to Canada. So, in order to ensure that no-one is double-dipping, the CRA wants precise matches.
This can also pose a problem for general partners and limited partnerships. Often, the general partner enters into the contracts on behalf of the limited partnership. If the supplier invoices in the name of the general partner as the recipient rather than the limited partnership, the CRA may disallow ITCs claimed by the limited partnership (who usually has raised the funds to undertake a project).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
