Quantifying GST/HST & QST paid on employees' expenses per year
You may want to assess how much tax your organization is paying on employees' expenses. Is your organization exposed to a meaningful tax risk on employees' expenses, leaving sales tax refunds behind or both? Below is a simulation of an organization that has reimbursed to its employees supplies where 10% were incurred outside Canada. As for the supplies incurred in Canada, 90% are taxable supplies, other than zero rated supplies within the following 4 provinces.
GST, HST & QST paid by an organization on employees expenses per year
| Jurisdiction | Employees Expenses (%) | $ 1 Million of Supplies | Combined GST, HST & QST Rate | Canada VAT Paid (90% taxable supplies) |
|---|---|---|---|---|
| Alberta | 15% | $ 150,000 | 5% | $ 6,750 |
| Ontario | 40% | $ 400,000 | 13% | $ 46,800 |
| Quebec | 25% | $ 250,000 | 14.975% | $ 33,694 |
| Nova Scotia | 10% | $ 100,000 | 15% | $ 13,500 |
| Outside Canada | 10% | $ 100,000 | 0% | $ 0 |
| Total | 100% | $1,000,000 | $100,744 |
So in this example for each $1,000,000 of employees' expenses, there is approximately $100K of taxes to manage.
Generally, for a business that is a GST and a QST registrant and exclusively engaged in commercial activities these taxes are:
- Fully recoverable (i.e. office supplies)
- Partially recoverable (i.e. 50% or 80% on some meals)
- Not recoverable (i.e. tax on insurance premium)
Last updated on December 30, 2022