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GST/HST/QST Exact Method or Factors Method
Wednesday, 18 January 2023
Written by Serge Vanier, CPA

A sales tax matter that all organizations reimbursing expenses to employees in Canada have to address is which method should they use? There are 2 methods to choose from as advertised by tax authorities: the exact method or Read more…

Optical Character Recognition (OCR)
Tuesday, 31 May 2022
Written by Serge Vanier, CPA

After conducting a wide range of tests, we have selected an Optical Character Recognition (OCR) provider that complements Advataxes. Considering that our clients’ expenses are mostly incurred in Canada we have put our focus to ascertain receipts from Read more…

New Advataxes Android/IOS App
Thursday, 13 May 2021
Written by Serge Vanier, CPA

Advataxes App is now available in the Google Play Store and the Apple App Store. Our App is an extension of our web application. As is the case with our employee expense web application, the strength of this Read more…

CSV Upload of a Bank Card Statement
Friday, 11 September 2020
Written by Serge Vanier, CPA

You can upload transactional information of a bank card statement (credit card or procurement card) in Advataxes. You will still need to add a digital photo or a pdf of an invoice for each transaction, for Canadian tax Read more…

Award – Advataxes Innovative Travel Technology 2018
Sunday, 30 December 2018
Written by Serge Vanier, CPA

The year 2018 ended on an excellent note. Indeed, Ad Valorem was awarded for Advataxes earlier this month the “Innovative Travel Technology 2018”. A total of 8 innovation awards have been granted by Levvel Research, formerly PayStream Advisors, Read more…

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GST/HST/QST Exact Method or Factors Method

January 18, 2023 by Serge Vanier, CPA Leave a Comment

A sales tax matter that all organizations reimbursing expenses to employees in Canada have to address is which method should they use? There are 2 methods to choose from as advertised by tax authorities: the exact method or the factors method. (See also our Exact Method VS Factors Method page).

1 – The Exact Method

Claiming GST HST rebate and input tax credit (ITC) is governed by Part IX of the Excise Tax Act (ETA). There are specific provisions that address reimbursement of expenses to employees, members of a partnership, members of the board and, volunteers of non-profit organizations such as section 175 of the ETA. That section states that if any of the persons mentioned before paid the tax payable, as indicated on an invoice, with respect to an acquisition that is subsequently reimbursed by the employer, then the tax paid by the employee and all is deemed paid by the employer. Assuming the employer respects all conditions in claiming a GST rebate, a HST rebate or an ITC, such as when the acquisition is used in relation of the activities of the employer, then simply put, the tax paid on an invoice is the tax to claim by the employer. That is what Canadian tax authorities called the “exact method” but that is nothing more than the law applied to employee expenses.

2 – The Factors Method – The Origin

At the time of the introduction of the GST in 1991 when there was a single federal tax rate across the country of 7%, the QST wasn’t effective, the economy was based on paper documents, there was no internet; the federal government introduced an administrative method called the factors method. That method could be applied to reimbursement of expenses, but not to allowances, had to account of the 50% reduction applicable to meals/entertainment and could only be applied when 90% of all expenses of an expense report are taxable, other than taxable at a rate of 0%.

Back then that method had a certain appeal despite the obvious shortcomings of being an administrative method so organizations have no legal recourse in case of litigation with tax authorities and the 90% test per expense report is somewhat problematic as you need to use the exact method on each expense report to see if you would qualify to use the factors method, which defy the purpose.
Yet the administrative task of handling expense reports supported entirely by paper receipts and the fact that there was only one value added tax rate for the entire country made the factors method an attractive method for several.

3 – The Factors Method – 32 years later

Fast forward 32 years later in an environment where there is HST at 15%, HST at 13% GST at 5% across Canada and a QST at 9.975% and more purchases from foreign suppliers where tax is not collected are made by employees so the question as to whether expense reports qualify to a significant extent to the factors method under the 90% rule is more problematic than ever. Registrants may simply not be entitled to recover any tax on expense reports despite incurring some taxable expenses on it, simply because 90% of those expenses are not taxable. Furthermore, the fact that the factors method is purely administrative removes legal ground to challenge assessments.

4 – The Exact method: Technologies to the Rescue

On the other hand, the paper handling issues of expense reports that existed 30 years is no longer as huge as it was. Today employees get more and more only digital images of those receipts as several organizations no longer issue paper receipts in the first place. As for those still issuing paper receipts, mainly restaurant bills and parking receipts, taking pictures of their receipts with their smartphone and uploading them in an app where fields can be deciphered with the OCR, so it is an efficient way of handling these documents. As for handling the current sales tax rules of the Canadian tax landscape, Advataxes incorporates matrices at the provincial level as well as at the expense level, there are no tax codes to create and to choose from.

5 – Tax Codes and Meals with Tips Issue

The tax code method on a meal expense with various percentages of tip amount where the latter one is not subject to tax is an issue since the tax code is supposed to calculate the tax to recover. What percentage can be used on one expense representing one supply, where one part is subject to tax (the meal) and another one is of a discretionary amount (the optional tip) not subject to tax? Is the exact recoverable amount posted?

6 – Safeguards from software

Safeguards and rules have been implemented in Advataxes for recoverable GST/HST and QST. For instance, GST/HST and QST payable is triggered for the year 2023 on KM allowances for a maximum of 68 cents in 2023 in a province and for 72 cents in a territory. On meal expenses there is a specific box for tip amount so the tax to recover is solely based on the expense amount before tip. It’s the exact amount that is recovered.

7 – Conclusion

The exact method is today a wise choice in an environment with substantial Canadian sales tax automation and where the organization has meaningful sales tax recoverable amount (see our page Simulation). If an expense qualifies for a tax refund, then claim it, and when an expense doesn’t qualify for a tax refund, don’t claim it. This is Advataxes sales tax management approach; it is implemented at the expense level. Advataxes is built so each digital receipt can be attached to each expense. All digital receipts can be attached to an expense report with a smartphone and the OCR can populate most fields. It is an easy way to fill out an expense report. The benefit of this cloud solution is how easy it is to review an expense report. A reviewer has access to each expense report and all digital images, side by side with each expense.

Filed Under: Canadian Taxation Tagged With: gst/hst, GST/HST/QST Exact Method vs Factors Method, qst

Optical Character Recognition (OCR)

May 31, 2022 by Serge Vanier, CPA Leave a Comment

After conducting a wide range of tests, we have selected an Optical Character Recognition (OCR) provider that complements Advataxes. Considering that our clients’ expenses are mostly incurred in Canada we have put our focus to ascertain receipts from organizations incurring notably travel expenses in Canada are by and large well deciphered.

Whether employees of our clients are using their smartphone to upload pictures of their receipts on our mobile app or they are using their laptop/desktop for notably uploading an electronic invoice that they would have received in an email or that they downloaded from the website of their suppliers, Advataxes can now shorten even further the processing time of filling out their expense report. Our clients can now benefit from this technology that uses artificial intelligence.

At the end of the day, our goal is for employees to get their business expenses reimbursed under their company policy, ensure they spend less time preparing their expense report, allow each organization to easily analyze spending, digitalize receipts, and ascertain that recoverable GST/HST and QST are both properly done and maximized. For more information and to view a demo, consult our OCR page on our website.

OCR

Filed Under: App, Uncategorized Tagged With: OCR Expense Report

New Advataxes Android/IOS App

May 13, 2021 by Serge Vanier, CPA Leave a Comment

Advataxes App is now available in the Google Play Store and the Apple App Store. Our App is an extension of our web application.

Advataxes Rating
As is the case with our employee expense web application, the strength of this App is the handling of recoverable Canadian GST/HST/QST. It can be used for both expenses and allowances that are reimbursed by an organization to its employees and volunteers.

The app precalculates paid GST/HST/QST as well as claimable GST/HST/QST that can be compared to taxes actually paid and as indicated on the digital image of the attached invoice, that is available in the same window and if necessary, the tax amount can be rectified by each employee. There are no tax codes in Advataxes.

Meal Allowance QC

GST/HST/QST rates are updated by us. Precalculated GST/HST/QST paid is either on a “tax included” basis or on a “tax extra” basis. The app uses the exact method for GST/HST & QST purposes.

The distance calculator provides the distance between two addresses or points of interest in North America, expressed in kilometers. For lodging expenses, the App is designed to get extra information by calculating the average cost per employee per night. There are a series of warnings and security features that are included, such as when there is an identical expense that has already been posted, when a tip amount exceeds a certain threshold, when values inserted are incompatible.

You can select up to two levels of approval, so an employee can submit an expense report to their supervisor who can review it and then submit that same expense report to the finance department.

There are a series of functionalities to upload pictures of your receipts and inset them to each expense report. Furthermore, there is a functionality to merge several images of a receipt such as multi-page hotel bills, into one PDF. Each employee can access expense reports and digital images that have already been filed.

Merge Receipts

The App provides the automatic conversion of the following foreign currency: USD, EUR, GBP, CNY, HKD, INR, JPY, and MXN to CAD. The App can be displayed in both English or French at the employee level. The App has to be used online, and your data is stored in a secure data center that is located in Canada.

Advataxes can also be used by non-Canadian GST/HST/QST registrants when filing travel expenses. The distance calculator also covers US point of interests and is available in miles rather than kilometers for US entities.

Filed Under: App

CSV Upload of a Bank Card Statement

September 11, 2020 by Serge Vanier, CPA Leave a Comment

You can upload transactional information of a bank card statement (credit card or procurement card) in Advataxes. You will still need to add a digital photo or a pdf of an invoice for each transaction, for Canadian tax purposes. Advataxes has several functionalities in that respect including an App.

Filed Under: Uncategorized

Award – Advataxes Innovative Travel Technology 2018

December 30, 2018 by Serge Vanier, CPA Leave a Comment

The year 2018 ended on an excellent note. Indeed, Ad Valorem was awarded for Advataxes earlier this month the “Innovative Travel Technology 2018”. A total of 8 innovation awards have been granted by Levvel Research, formerly PayStream Advisors, as the result of the evaluation of more than 90 solutions. The management of recoverable GST / HST and QST on employee expenses is at the center of Advataxes innovation. See the «Award» page here
See also the press release page here
Levvel-Research-Award_Advataxes
We should note that a predominant client comment is to the effect that Avataxes is easy to use. See the Capterra website; here
In addition, historical data of recoverable GST, HST and QST for organizations with expenditures across Canada and outside Canada indicates a very high level of precision of recovered GST, HST and QST. See the page «Study» here
In this context, it is an accomplishment to both properly recover GST / HST and QST, while remaining easy to use for all employees completing their expense accounts. Since Canadian value added taxes can be as high as 15%, it is a question of economic importance for a wide range of organizations. See our «Simulation » page; here

Filed Under: Uncategorized

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LATEST BLOG POSTS

  • GST/HST/QST Exact Method or Factors Method
  • Optical Character Recognition (OCR)
  • New Advataxes Android/IOS App
  • CSV Upload of a Bank Card Statement
  • Award – Advataxes Innovative Travel Technology 2018

About Advataxes

Advataxes is an online accounting software for employee expenses that automates recoverable GST/HST and QST for small, medium and large businesses. Employees can fill out and submit their expense reports to their supervisors from anywhere using their PC, tablet or smartphone in no time. This online software is available in English and French. Advataxes is a product of Ad Valorem which is a member of Antea an internationnal association of independent firms.

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