What's new in consumption taxes
You can never have too much information! Every business needs to keep abreast of the latest news from the tax authorities. Here's what Mallette has listed for you over the last few months.
To read in this issue:
Passenger car: you could claim more CTI and RTI
On December 23, the Department of Finance Canada announced new automobile expense deduction limits and prescribed rates for automobile expense benefits for income tax purposes that will apply in 2022.
Since 1 January 2022, the following changes to the ceilings and rates have come into force:
- The depreciable value limit for capital cost allowance (CCA) purposes for zero-emission passenger cars will be raised from $55,000 to $59,000 (before tax), for vehicles (new and used) acquired on or after 1 January 2022.
- The maximum depreciable value for CCA purposes for passenger vehicles will be increased from $30,000 to $34,000 (before tax) for vehicles (new and used) acquired on or after January 1, 2022.
- The limit on the deductibility of car leasing costs will be raised from $800 to $900 per month (before tax) for new leases.
This measure applies to income tax, but has implications for GST and QST. It means that a registrant will now be able to claim the GST and QST paid on these vehicles up to the prescribed amount of the purchase or lease. This measure applies to vehicles acquired or leased on or after January 1, 2022.
For the moment, Finance Québec has not yet announced the harmonization of the QST system in this regard. Based on the general principle of harmonizing the QST with the GST, there is every reason to believe that this will be the case.
A little flexibility for document requirements to claim CTI and RTI
TPS
Documentary requirements
Under the GST/HST system, businesses can claim ITCs to recover the GST/HST they pay on goods and services used as inputs in their commercial activities.
However, companies must obtain and retain certain information to support ITC claims. The information required is contained in documents provided by suppliers, such as invoices or receipts.
The information requirements for these documents vary greatly when the amount paid or payable for the supply is equal to or exceeds the $30 or $150 thresholds.
In addition, under the ITC disclosure rules, the supplier or an intermediary (i.e., a person who makes or facilitates the making of a supply on behalf of the supplier) must provide its business name and, depending on the amount paid or payable in respect of the supply, its GST/HST registration number on the supporting documentation.
To simplify tax compliance for businesses, the 2021 Budget proposes to increase the ITC information thresholds to $100 (from $30) and $500 (from $150).
This measure comes into force on 20 April 2021.
Billing agent
Under the prescribed information rules, until recently, an intermediary did not include a billing agent (i.e., an agent who collects consideration and tax on behalf of an underlying vendor, but does not make or facilitate a supply). Billing agents were therefore unable to provide their GST/HST registration number and/or trade name as part of the required ITC information. Instead, the recipient of the supply was required to obtain the business name and registration number of the underlying vendor.
As announced in the 2021 federal budget, billing agents will now be allowed to be treated as intermediaries for the purposes of the ITC information rules.
This measure comes into force on 20 April 2021.
TVQ
The QST system will be harmonised with the measures described above, based on the general principle of harmonising the QST system with the GST system, as announced by Finance Québec.
Reminder: don't forget to validate GST and QST numbers!
For several years now, the tax authorities have been providing businesses with tools to validate the GST and QST numbers that a supplier indicates on an invoice or other document.
If you haven't already done so, we recommend that you set up a process for validating your suppliers' numbers. Here are the links to verification tools:
Taxable benefits: don't forget to make your GST and QST remittance!
The time for taxable benefits has arrived! Every new year brings with it new compliance requirements. Such is the case with the GST and QST rebate for taxable benefits granted by employers to their employees.
If you are in this situation, you must calculate the GST and QST on the amount of the taxable benefit (as determined under the income tax rules) and remit it in the tax return covering the month of February of the year following the year in which the benefit was granted.
Example :
In 2021, Nadine used the vehicle that her employer made available to her in part for personal use. As a result, her employer had to calculate taxable benefits for Nadine's 2021 tax year:
- Right of use: $3,500.
- Operating expenses: $2,500.
Result: Nadine's employer must remit the following GST and QST amounts using the factors shown in the table below.
Since Nadine's employer files its tax returns on a monthly basis, it must include the GST and QST amounts calculated in its February 2022 return, to be filed no later than March 31, 2022.
Do you pay dues directly to a professional body of which your employee is a member? Be careful!
Did you know that Revenu Québec considers that, as a general rule, the payment or reimbursement by an employer of the professional dues that its employee must pay to be a member of a professional association (such as the Ordre des CPA or the Barreau du Québec) constitutes a taxable benefit?
In fact, according to Revenu Québec, payment of this contribution is imposed on this member (his or her employee) as a personal obligation.
Consequently, in such a situation, the employer cannot claim an ITR for the amount included in the rebate.
But that's not all... The Canada Revenue Agency takes the opposite position! Thus, the payment or reimbursement by an employer of the professional dues that his or her employee must pay to be a member of a professional association is NOT a taxable benefit. Consequently, in this case, the employer will be able to claim an ITC for the amount included in the reimbursement.
It's enough to make you lose your Latin!
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If you have any questions or concerns about the information contained in this Bulletin, please contact the partner responsible for your file. He or she will be pleased to direct you to the Mallette resources specializing in commodity taxes.
This document is published for the clients of Cabinet Mallette and should not replace professional advice. No action should be taken without first consulting a specialist.