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

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

Advataxes, an only employee expense software with a strength on handling recoverable GST/HST/QST has been nominated by the firm PayStream Advisors for a Technology Innovation Awards in the ”Travel & Expense” category. The handling of meals & gratuities in this video is an example on how Advataxes has been designed to address GST/HST & QST rules. Optional tips is not subject to the GST/HST/QST, so we ask all users to put optional tips in a separate field. We also ask users to include the total before tips in a separate field and select the province and the date in which they incurred the meal expense. Once that is done, the rest is automation. It is much more efficient that asking employees to select a tax code (i.e CAON, ER, EN, etc..) since your typical employee filing out an expense report is not a tax expert. Furthermore, due to the added precision, it allows organizations to easily use the exact method, which is much more beneficial in terms of saving and managing recoverable taxes. On this issue refer to our webpage entitled “Exact Method Versus Factors Method”. At the end of the day Advataxes was designed to address the Canadian sales tax environment first because there was nothing out there really designed to address this to the extent we’re doing and second there is a lot of money involved, see our “simulation” page.

Within an interpretation bulletin dated October 25, 2017, (TVQ 206.1-10) the Government of Quebec explains the mechanics of the phasing out of the ITR restrictions for large businesses (LB) starting on January 1, 2018.
The scheme of these rules is similar as the current one that exists under the HST regime for LB in Ontario and in PEI.
As a recap, this QST measure grants an ITR at the rate of:

25% for the period of January 1, 2018 to December 31, 2018
50% for the period of January 1, 2019 to December 31, 2019
75% for the period of January 1, 2020 to December 31, 2020
100% from January 1, 2021 and after, to LB on expenses covered by the ITR restrictions.

Generally speaking those expenses are:

• Kilometer allowances
• Fuel for vehicles of less than 3,000 KG
• Vehicles of less than 3,000 KG
• Meals and entertainment (including meal allowances)
• Telecommunication
• Energy

Paragraph 13 of this bulletin mentions that the QST paid for a lease interval of a vehicle that begins on or after January 1, 2018 will entitle the LB to an ITR at the rate of 25%. QST paid for a lease interval that begins on or after January 1, 2019 will entitle the LB to an ITR at a rate of 50%. QST paid for a lease interval that begins on or after January 1, 2020 will entitle the LB to an ITR at a rate of 75%. Finally QST paid for a lease interval that begins on or after January 1, 2021 will entitle the LB to an ITR at a rate of 100%.
Paragraph 43 of the bulletin deals with allowances, such as kilometer allowances. The paragraph stipulates that allowances paid in 2018 will entitle the LB to an ITR of 25%, and so forth for the subsequent years.
As for meals and entertainment and meal allowances, LB have to take into consideration that in general these expenses are also subject to the usual 50% limitation.

For periods starting on July 1, 2017 and ending on June 30, 2018 the recapture rate of input tax credits (RITC) in Ontario is now set at 25%. Large businesses, as defined under the Excise Tax Act, are subject to the recapture rules.
Generally, an organization is considered a “large business” during a period if the organization is a GST/HST registrant with revenues of more than $10 million in its last fiscal year;
The recapture amount is calculated solely on specified property and services acquired or brought into Ontario, namely:
1) electricity, gas & steam
2) certain telecommunication services
3) food, beverages and entertainment, subject to the 50% limitation
4) qualifying motor vehicles
5) fuel (other than diesel fuel) that is for the engine of a qualifying motor vehicle
As an example a $100 meal allowance in Ontario in the period of July 2017; the ITC will equal $5.75 and the RITC will equal $0.88 or 25% of the provincial component of the value added tax subject to 50%. More info in CRA info-sheet GI-171

Today, Quebec Finance minister Carlos Leitao tabled its 2017-2018 budget. In the section listing the revenue forecast for 2017-2018 for the province, (section D entitled “the Government’s Detailed Financial Framework”) it states that “… the gradual elimination of restrictions of input tax refunds, for large businesses as of January 1, 2018 puts downward pressure on the growth of consumption tax revenues.”

The Quebec government reiterates that large businesses will be able to claim more taxes on some kind of expenses starting on January 1, 2018.

As a reminder the restricted input tax refunds are generally applicable on;
1) Meals and entertainment
2) Telecommunication services
3) Fuel for vehicles of less than 3000 KG
4) Vehicles of less than 3000 KG
5) Energy

This process is very similar to the restricted input tax credits (RITC) rules applicable in Ontario and in Prince Edward Island. The phasing out of RITCs is spread over a 4-year period, yet with different implementation date.

So in January 2018, a meal expense incurred by a large business will trigger certain rules and rates in Quebec, for QST Purposes, and different rules and rates in Ontario for HST purposes. The same goes with PEI. Regular recovery rates are applicable in other provinces, yet the tax rate may differ.

The QST phasing out period for large businesses is as follows:
January 1, 2018 to December 31, 2018: 75% still subject to restrictions
January 1, 2019 to December 31, 2019; 50% still subject to restrictions
January 1, 2020 to December 31, 2020: 25% still subject to restrictions
January 1, 2021 and onward: no more restrictions

Advataxes is a software that is built on expense categories, also called supplies, the selection of the province by employees, and the GST-QST organization profile to manage well these kind of tax rules recoveries.