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? 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.
|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|
So in this example for each $1,000,000 of employees' expenses, there is approximately $100K of taxes to manage.
Generally, for a large business that is a GST and a QST registrant and exclusively engaged in commercial activities these taxes are:
For this QST gradual elimination of the restricted input tax refund, at the rate of 25% In 2018, 50% in 2019, 75% in 2020 and 100% thereafter, this tax policy represents a major spending for the Government of Quebec. Within the 2017-2018 budget of the government of Quebec, it is indicated that this measure will cost $22 million for the financial year 2017-2018, $115 million for the financial year 2018-2019, $220 million for the financial year 2019-2020 and $336 million for the financial year 2020-2021.
The QST recovery by large businesses due to the phasing out of restricted input tax credits on expenses such as meal & entertainment, km allowance, gas for vehicles of less than 3000 kg, vehicles of less than 3000 kg, telecommunication and energy is substantial. Advataxes is an employee expense software designed notably to recover QST on the phasing out of restricted ITR on reimbursement of expenses and allowances paid to employees.
Last updated on January 30, 2018