As we explore in this blog post, Canada’s value-added tax system, including the GST, HST and QST, is extremely complex and the risks to businesses that get it wrong are substantial, with mistakes costing significant money. To help guide you through the wilderness of Canadian value-added tax, we partnered with the experts at Ryan on a recent webinar. Below are just a few of the many questions we received:
- Question: “With the phase-out of the Recapture of Income Tax Credit (RITC) in Ontario, are we supposed to report at the new 75% rate or do we report at 100% and will it be reduced on the return?” A: (You continue to enter the 100% recapture amount and the GST/HST NETFILE system will apply the 75% recapture rate.)
- Question: “If an employee used an allowance outside of Canada can we still apply the simplified factor?” A: (No – because one of the conditions required for tax to be recoverable with respect to an allowance is that it must be paid in respect of supplies acquired in Canada, at least 90% of which are taxable. If the employee will be using the allowance for supplies outside Canada, no tax can be recovered.)
- Question: “Can you choose between using the simplified factor method for credit cards only, and keep the actual method of calculation for all other employee expenses?” A: (Factors can only be used on credit cards where there is “joint and several liability.” And you can’t “cherry pick” simplified factors – an organization must use them consistently among employees and within categories and use the same method throughout the fiscal year. If there is joint and several liability, this would be considered an employee reimbursement and should be treated no differently than other employee reimbursements.)
Our guide to Canadian taxes and expense reporting, prepared in co-operation with the tax experts at Ryan, explains the potential complications, gives examples of how GST, HST and QST work, and shows how Concur and Ryan can help head off those risks.