ABOLITION OF THE SIMPLIFIED METHOD FOR EXPENSE ACCOUNTS ON JANUARY 1, 2014 FOR LARGE COMPANIES
At the last APFF Commodity Tax Symposium, Revenu Québec representatives announced the abolition of the simplified method (5%) for large enterprises (“GE”) as of January 1, 2014. Affected companies will have to change the way they claim QST deemed paid on expense account reimbursements to their employees.
CONTEXT OF THE SIMPLIFIED METHOD
In order to simplify QST administration, Revenu Québec has introduced two methods for calculating ITRs (one for GEs and one for SMEs) that allow a registrant to avoid the step of breaking down all the expenses that appear on the documents produced by employees to justify the reimbursement of these expenses. These methods are optional and based on administrative policies. They are not based on legislative provisions.
A company whose taxable sales and those of its associates for tax purposes exceeded $10 million during the previous fiscal year is considered a GE for QST purposes. GEs are subject to the restrictions of article 206.1 LTVQ.
SIMPLIFIED TVQ METHODS
The GE method involves applying a pre-established factor (5% since 2012) to the total reimbursement of expenses to employees. The method for SMEs consists of applying a pre-established factor of 9/109.
CONTEXT OF ABOLITION
Revenu Québec has examined the simplified GE method in light of the harmonization of QST with GST and the gradual abolition of QST restrictions starting in 2018. Due to difficulties in interpretation and application, and in response to certain planning initiatives, Revenu Québec has decided to abolish this method.
NEW POLICY
Revenu Québec will allow EGs to use the simplified method for SMEs, taking into account the QST restrictions for EGs. Details to follow.
DETAILS OF THE SIMPLIFIED GE METHOD BEFORE 2014
Revenu Québec has also reiterated the application of the simplified GE method. As indicated in the QST interpretation bulletin. 212-1/R4, an expense claim is a statement of personal expenses incurred by an employee in connection with his or her employer’s activities. These are usually travel expenses.
Example of eligible personal expenses :
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Monthly cell phone charges, when the contract is in the employee’s name;
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Expenses for a meal with a customer;
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Gift for a customer.
Example of non-eligible personal expenses :
- Meals and drinks for the following events:
- Departure of a colleague;
- Celebration of the successful completion of an exam by several employees.
- Cost of field hockey tickets given to a customer;
- Cost of a box to attend a field hockey game.
Revenu Québec wants to prevent a registrant from improperly claiming a QST refund on a restricted expense through an expense account instead of paying a supplier directly.
Should you require any further information regarding the changes effective January 1, 2014, please do not hesitate to contact us.
Should you require any further information regarding the changes effective January 1, 2014, please do not hesitate to contact us.
Benoît Vallée, CPA, CGA
Senior Director, Indirect Taxes
514 878-0240
bvallee@demersbeaulne.com
Senior Director, Indirect Taxes
514 878-0240
bvallee@demersbeaulne.com
