Starting January 1, 2014, large businesses can no longer use the simplified method (5%) to calculate input tax refunds (ITRs) in respect of expense reimbursements and allowances paid to employees. This change was announced in a Revenu Québec bulletin issued on October 10, 2013. Its implications are considered below.
Generally, businesses that are involved in taxable commercial activities will be able to claim ITRs in respect of reimbursements of expenses incurred by an employee after December 31, 2013, by using:
The method chosen must be used consistently within each category of reimbursed amounts (e.g. airfare, hotel, food and beverages, etc.) throughout the fiscal year. If the factor method is used, the same documentary requirements will apply for GST and QST purposes.
The factor method used to claim GST input tax credits will also be available for ITR claims, but certain rules that are unique to the QST regime will apply:
The QST factor method cannot be used to calculate an ITR in respect of an allowance paid to taxable expenses, an ITR equal to 9.975/109.975 of the allowance may be claimed under certain conditions.
1. Several exceptions and qualifying conditions apply in respect of ITR restrictions. For a specific issue, a separate analysis should be performed.