Excise Tax Act

Marginal note:Bad debts

• 231 (1) Where a person has made a taxable supply (other than a zero-rated supply) for consideration to a recipient with whom the person was dealing at arm’s length, to the extent that it is established that the consideration and tax payable in respect of the supply have become in whole or in part a bad debt, the person may, in determining the net tax for the person’s reporting period in which the bad debt is written off in the person’s books of account or for a subsequent reporting period, deduct the amount determined by the formula

  A × B/C

  where

  A

  is the tax payable in respect of the supply,

  B

  is the total of the consideration, tax and any amount that can reasonably be attributed to a tax imposed under an Act of the legislature of a province that is a prescribed tax for the purposes of section 154 (referred to in this section as “applicable provincial tax”) remaining unpaid in respect of the supply that was written off as a bad debt, and

  C

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

  provided the person reports the tax collectible in respect of the supply in the person’s return under this Division for the reporting period in which the tax became collectible and remits all net tax, if any, remittable as reported in that return.

• (2) [Repealed, 2000, c. 30, s. 58]

• Marginal note:Recovery of bad debt

  (3) If a person recovers all or part of a bad debt in respect of which the person has made a deduction under subsection (1), the person shall, in determining the net tax for the person’s reporting period in which the bad debt or that part is recovered, add the amount determined by the formula

  A × B/C

  where

  A

  is the amount of the bad debt recovered by the person;

  B

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

  C

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

• Marginal note:Limitation

  (4) A person may not claim a deduction under subsection (1) in respect of an amount that the person has, during a particular reporting period of the person, written off in its books of account as a bad debt unless the deduction is claimed in a return under this Division filed by the person within four years after the day on or before which the return under this Division for the particular reporting period is required to be filed.