Excise Tax Act

Marginal note:Bad debt — deduction from net tax

• 231 (1) If a supplier has made a taxable supply (other than a zero-rated supply) for consideration to a recipient with whom the supplier was dealing at arm’s length, it is established that all or a part of the total of the consideration and tax payable in respect of the supply has become a bad debt and the supplier at any time writes off the bad debt in the supplier’s books of account, the reporting entity for the supply may, in determining the reporting entity’s net tax for the reporting period that includes that time or for a subsequent reporting period, deduct the amount determined by the formula

  A × B/C

  where

  A

  is the tax in respect of the supply;

  B

  is the total of the consideration, tax and applicable provincial tax remaining unpaid in respect of the supply that was written off at that time as a bad debt; and

  C

  is the total of the consideration, tax and applicable provincial tax in respect of the supply.

• Marginal note:Reporting and remittance conditions

  (1.1) A reporting entity is not entitled to deduct an amount under subsection (1) in respect of a supply unless

  • (a) the tax collectible in respect of the supply is included in determining the amount of net tax reported in the reporting entity’s return under this Division for the reporting period in which the tax became collectible; and

  • (b) all net tax remittable, if any, as reported in that return is remitted.

• (2) [Repealed, 2000, c. 30, s. 58]

• Marginal note:Recovery of bad debt

  (3) If all or part of a bad debt in respect of which a person has made a deduction under this section is recovered at any time, the person shall, in determining the person’s net tax for the reporting period that includes that time, add the amount determined by the formula

  A × B/C

  where

  A

  is the amount of the bad debt recovered at that time;

  B

  is the tax in respect of the supply to which the bad debt relates; and

  C

  is the total of the consideration, tax and applicable provincial tax in respect of the supply.

• Marginal note:Limitation period

  (4) A person may not claim a deduction under this section in respect of a bad debt relating to a supply unless the deduction is claimed in a return under this Division filed within four years after the day on or before which a return of the person was required to be filed for the reporting period in which the supplier has written off the bad debt in its books of account.

• Marginal note:Definitions

  (5) The following definitions apply in this section.

  applicable provincial tax

  applicable provincial tax, in respect of a supply, means any amount that can reasonably be attributed to a tax, duty or fee imposed under an Act of the legislature of a province in respect of the supply that is a prescribed tax, duty or fee for the purposes of section 154. (taxe provinciale applicable)

  reporting entity

  reporting entity for a supply means

  • (a) if an election has been made under subsection 177(1.1) in respect of the supply, the person who is required, under that subsection, to include the tax collectible in respect of the supply in determining the person’s net tax; and

  • (b) in any other case, the supplier. (déclarant)