Dentist ITC Rules in Canada: GST/HST Allocation After Davis Dentistry
Updated: Oct 4
Reviewed October 4, 2026.
GST/HST-registered dental practices that relied on CRA's former orthodontic arrangement now need to apply the ordinary input tax credit (ITC) rules. The relevant change applies to fiscal years beginning on or after January 1, 2025.
What the former 35% arrangement actually did
The 1991 administrative arrangement allowed an estimate of up to 35% of total orthodontic treatment consideration to represent consideration for orthodontic appliances during reporting periods. It also required a year-end reconciliation to actual appliance charges. It was not an automatic entitlement to recover 35% of every expense.
What Davis Dentistry decided
In Canada v. Dr. Kevin L. Davis Dentistry Professional Corporation, 2023 FCA 76, the Federal Court of Appeal dismissed the Crown's appeal from a decision allowing the taxpayer's appeal of the ITC reassessments. The case should not be described as a judgment that simply rejected a 35% expense allocation. The Supreme Court dismissed the Crown's application for leave to appeal in December 2023.
What CRA Notice 339 changed
Notice 339 revoked the administrative arrangement. For a practice using a non-calendar fiscal year, identify the first fiscal year starting on or after January 1, 2025. That is more precise than applying January 1 to every practice regardless of its year-end.
Exempt dental services generally do not support ITCs; zero-rated orthodontic appliances are taxable supplies at a zero rate and can support ITCs. Registration, documentation and the actual commercial use of a purchase remain relevant. Shared inputs need a fair and reasonable allocation applied consistently.
A practical review for your practice
List your supplies and classify them as exempt, zero-rated or taxable at the applicable rate. Separate directly attributable purchases from shared overhead. Document the allocation method and retain patient billing information, supplier invoices and calculations supporting the claim.
Reconcile the method to the practice's actual activities. Review the returns for the affected fiscal years and obtain advice before making corrections. For a material uncertainty about a supply or allocation, consider a GST/HST ruling.
Sources
Discuss your situation with Xponents
Contact Xponents to discuss the issue and the scope of a tax-planning review. Advice and implementation depend on your facts and the agreed engagement.
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