Last Week, the Canada Revenue Agency ("CRA") released GST/HST Info Sheet GI-122 "The GST/HST Implications of the Acquisition of Solar Panels Under the micro Feed-In Tariff Program in Ontario" to clarify when a person must register for GST/HST purposes and when input tax credits ("ITCS") will be allowed. The new Info Sheet follows a period of uncertainty during which auditors would not allow ITC claims (and auditors questioned whether homeowners in the Micro FIT were permitted to register for GST/HST purposes).
Under the Micro Feed-In Tariff Program in Ontario, homeowners may install solar panels on their roof or elsewhere on their property, engage in activity of electricity generation, and engage in the commercial activity of selling the electricity to the Province of Ontario. The issue is whether the homeowner is renovating used residential property (where no ITCs would be allowed) or purchasing solar panels and other equipment to manufacture energy and sell that energy to the province.
The Info Sheet determines that the homeowner (participating in the Ontario Micro FIT program) must register for GST/HST purposes if he/she receives more that $30,000 per year from the province under the program. If the homeowner does not make $30,000 under the program, he/she may be a "small supplier" and would not be required to register for GST/HST purposes. Small suppliers may voluntarily register for GST/HST purposes.
If a homeowner registers for GST/HST purposes, he/she must charge, collect and remit GST/HST on the money received from the Ontario government under the FIT Program. They also must be careful to charge GST/HST on other taxable supplies (e.g., garage sales, sales of used cars, etc.).
If a registered homeowner purchases equipment to be used in connection with energy generation, he/she may claim ITCs and recover the GST/HST paid on those purchases. However, these claims are subject to an audit by the CRA. As a result, homeowners must be careful to not use the CRA as a personal ATM machine. In other words, the CRA will scrutinize ITC claims to ensure unrelated home repairs and other personal expenses do not give rise to ITC claims.
For more information, there is a complex / high level opinion given by Torys LLP to the Solar Industries Association that has been posted on the Internet. For even more information, please go to the Solar Industries Association web-site.