• Service: Tax, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 10/30/2013

Canada - QST changes affecting large businesses in Quebec 

October 30: Revenue Quebec released additional information relating to the upcoming repeal of the 5% simplified method that is used by many large businesses to claim QST input tax refunds for employee expense accounts.

Large businesses will no longer be able to use the 5% simplified method for expenses incurred by their employees or allowances paid to these individuals on or after 1 January 2014. Accordingly, affected businesses may want to encourage their employees to file their 2013 expense accounts early in December 2013 to allow time to pay these claims by 31 December 2013 and to make the transition easier.

The 5% simplified method for large businesses will be replaced by a factor method for some expenses.

  • Qualifying large businesses will be able to claim eligible input tax refunds relating to expense reimbursements paid to employees by using a 9/109 QST factor method.
  • For expense allowances paid to employees, an eligible input tax refund will be claimed based on a 9.975/109.975 tax fraction of the qualifying expense allowances.
  • The QST factor method and the tax fraction method will not apply on restricted goods and services for large businesses for claiming input tax refunds, and these large businesses will not be eligible to claim any input tax refunds on such restricted expenses.

For these purposes, a business is generally considered a "large business" if its total taxable supplies and those of the business' associates exceed $10 million* for the preceding fiscal year.

*$ = Canadian dollar

Read an October 2013 report prepared by the KPMG member firm in Canada: Prepare for Cash Flow Impact of QST Change for Employee Expense Accounts

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