Hello, and welcome to our questions and answers
webinar on the Goods and Services Tax (GST)/
Harmonized Sales Tax (HST). My name is Maurice
and I am your presenter. Today’s webinar will
be recorded and posted at a later date
on the Canada.ca website. We received a lot
of questions. Some of the questions did not
relate to the GST/HST applicable to taxable benefits.
This webinar will focus only on the GST/HST
as it applies to taxable benefits. But as
always, if you have questions on other tax-related
matters, please contact the CRA’s business enquiries line
at 1-800-959-5525. You can also visit Canada.ca, and
search for “Recorded webinars for businesses.” Those webinars
will help you with different aspects of payroll
and more. You will also find webinars about
taxable benefits and GST/HST.
Before I answer your questions, I will quickly
review the GST/HST rules as it applies to
payroll. The cost of benefits or non-cash compensation
provided to an employee, commonly referred to as
fringe or employee taxable benefits may be subject
to the GST/HST. For the most part, the
Income Tax Act directs the GST/HST treatment of
these benefits. Your employee has received a benefit
if you pay for or give something that
is personal in nature. Generally, if a benefit
is taxable as income, we consider you to
have made a supply of a property or
service to the employee. If a property or
service benefit is subject to GST/HST, you are
considered to have collected the GST/HST on that
property or benefit. However, there are situations where
you will not be considered to have collected
this tax on benefits given to employees. The
following steps will help you determine whether you
have to send to the CRA the GST/HST
on employee taxable benefits. Step 1 – Determine
whether the benefit is taxable under the Income
Tax Act or the Excise Tax Act (see
the Benefits chart in the Guide T4130 employers'
guide – Taxable benefits and allowances.) Step 2
– For each taxable benefit, determine if there
are situations where you are not considered to
have collected the GST/HST. Step 3 – If
you are considered to have collected the GST/HST
on a taxable benefit, you have to calculate
the amount of the tax that is due.
Information on how to calculate the tax is
in the section called “Automobile operating expense benefits”
and “Benefits other than automobile operating expense benefits”
in the T4130. And step 4 – Enter
the amount of the GST/HST due on your
GST/HST return and send the amount with your
return for the reporting period that includes the
last day of February. For information on how
to fill out a GST/HST return, see our
recorded webinars for businesses on the Canada.ca website.
I will now answer your questions. We received
a lot of questions about input tax credits
(ITCs) and how to claim the GST/HST you
paid. You may be eligible to claim ITCs
on expenses that relate to your commercial activity.
On the screen, you have examples of common
purchases and expenses for which you may be
eligible to claim ITCs. To claim an ITC,
an expense must be reasonably related to your
business. You can find more information about the
GST/HST in the recorded webinars on the Canada.ca
website.
In what situations would GST/HST affect payroll? Salaries,
wages, commissions, and other cash remuneration (including gratuities)
you make to employees are not subject to
GST/HST. However, the cost of benefits or non-cash
compensation provided to an employee, commonly referred to
as a fringe or employee taxable benefit, may
be subject to the GST/HST.
Is GST charged when invoicing a live out
allowance (an LOA)? A mine sells to a
contractor, who we have a contract with as
a subcontractor. We invoice our services and live
out allowances. We have been charging them GST
and will send it to the CRA. When
working for other contractors, they have sent the
GST to the CRA, because they told us
it would be considered in lining otherwise. Clarification
would be much appreciated. From your question, I
do not know if you are talking about
a housing allowance only, or a transportation allowance
and a housing allowance. When you provide a
worker with a long-term accommodation (30 days or
more) in prescribed zones, it is generally exempt
from GST/HST, so you would not include the
accommodation in the value of the benefit. However,
short-term accommodation is generally subject to GST/HST. Utilities
are generally subject to GST/HST, so you would
include that in the value of the allowance.
If you provide a transportation allowance, the GST
is also included. When you mention in lining,
I think you mean interlining where several carriers
may take part in the supply of a
freight transportation service during the course of a
continuous freight movement from the shipper to the
consignee, but only one carrier invoices the customer.
Only the invoicing carrier who settles the freight
bill directly with the customer (either the shipper
in the case of a prepaid move, or
the consignee in the case of a collect
haul), is responsible for charging and collecting any
applicable GST/HST. Supplies of freight transportation services between
interlining carriers are zero-rated. This is the case
even if the invoicing carrier is acting as
an agent of other carriers for collecting the
GST/HST. For more information, see the page called
“GST/HST for freight carriers” on the Canada.ca website
and the benefits chart in the Guide T4130.
For the definition of a prescribed zone, see
Chapter 3 in Guide T4130.
How is GST/HST calculated for an automobile taxable
benefit in the auto industry—such as a dealership,
for management and salespersons who drive demos throughout
the year? Is it a different formula from
the normal 5% rate in Alberta? Similar to
any other industry, when a dealership provides an
automobile to an employee for personal use, a
taxable benefit must be reported. The benefit for
an automobile is generally made up of: a
standby charge benefit, plus an operating expense benefit,
minus any reimbursements employees make in the year
of these benefits. When you are calculating the
amount of GST/HST that you are considered to
have collected on an automobile benefit, you must
take all three factors into considerations. The standby
charge will be calculated at a certain percentage,
and the operating expense benefit will be calculated
at another.
For the operating expense benefit, if your employee
works in a participating province, you are considered
to have collected an amount equal to a
percentage of the value of the benefit for
GST/HST purposes, based on one of the following
rates: 11% for Prince Edward Island and Nova
Scotia; 10% for New Brunswick and Newfoundland and
Labrador; and 9% for Ontario. If your employee
works in a non-participating province or territory (the
rest of Canada), you are considered to have
collected 3% of the value of the benefit
for GST/HST purposes.
For the standby charge benefit, if your employee
works in a participating province, you are considered
to have collected GST/HST as follows: 14/114 for
Nova Scotia, New Brunswick, Prince Edward Island, and
Newfoundland and Labrador; and 12/112 for Ontario. If
your employee works in a non-participating province or
territory (the rest of Canada), you are considered
to have collected 4/104 of the value of
the benefit for GST/HST purposes. Let’s look at
an example.
As a corporation registered for GST/HST, you buy
a vehicle that is used more than 50%
in commercial activities and is made available to
your employee during 2017. The last establishment where
the employee ordinarily reported in the year for
the corporation was located in Manitoba. You calculated
a taxable benefit (including GST and PST) of
$4,800 on the standby charge and an operating
expense benefit of $2,400. The GST on the
standby expense benefit is: $4,800 x 4/104 =
$184.62 The GST on the operating expense benefit
is: $2,400 x 3% = $72.00 If you
are a large business for the purposes of
the recapture of input tax credits for the
provincial part of HST, different rates will apply.
For more information, see Guide T4130, Employers' Guide
– Taxable Benefits and Allowances.
Which employee benefits should be charged GST/HST? To
determine whether GST/HST has to be included in
the value of a benefit, see the benefits
and allowances chart on the Canada.ca website. The
chart is also included in the Guide T4130.
What are the GST implications on payroll items
that are a reimbursement (with a receipt) versus
an allotment (flat amount paid, but no receipt
required)? The GST implications would be the same.
When you reimburse an employee for an employment-related
expenses, or provide a reasonable allowance, the amount
paid is in cash. Cash remuneration you make
to employees is not subject to GST/HST (see
Slide 4 for more details).
What about Ontario’s 8% tax on insurance? Should
that be included in the amount of a
taxable benefit? What about in the case of
Long term disability insurance? Insurance products are exempt
from GST/HST. However, the Province of Ontario charges
an 8% provincial sales tax on insurance and
benefit plans. Generally, when calculating an employee’s taxable
benefit, you must include any provincial levies or
sales tax that you, the employer, paid on
the insurance premiums. If the employee paid these
taxes either directly or through reimbursements to you,
you must deduct these taxes when calculating a
benefit’s value. Contact the Ontario Ministry of Finance
for more information.
When evaluating the amount of a taxable benefit,
should GST/HST be included in the amount? Does
it make a difference if the employer is
a charity not registered for GST/HST, but the
charity claims a rebate? To determine whether GST/HST
has to be included in the value of
a benefit, see the benefits and allowances chart
on the Canada.ca website or in the Guide
T4130. The amount of GST/HST you include in
the value of a benefit is calculated on
the gross amount of the benefit, before subtracting
taxes or any amounts reimbursed by the employee.
Non-registered entities (such as a qualifying charity) still
have to include any GST/HST paid in the
value of the benefit. However, at year-end, the
non-registered entity will not be considered to have
collected GST/HST on the benefit and, therefore, will
not have to send any GST/HST to the
CRA.
Is GST/HST applied on monthly, ongoing, taxable benefits
for the use of a company vehicle? The
benefit for an automobile is generally made up
of a standby charge benefit, plus an operating
expense benefit, minus any reimbursements employees make in
the year for these benefits. The standby charge
benefit and the operating expense benefit includes GST/HST.
For example, a corporation leases an automobile from
a dealership and makes monthly payments (including GST/HST)
to the dealership. The corporation then provides the
automobile to an employee for use in the
course of their employment. However, some of the
employee’s use of the automobile is personal. When
calculating the amount of the standby charge benefit,
you must include the GST/HST you paid under
the leasing contract. At year-end, the corporation will
be considered to have collected GST/HST on the
taxable benefit and must calculate the amount of
taxes due (see slides 6 through 9 for
a detailed calculation). The GST/HST due would then
be reported on the GST/HST return for the
reporting period that includes the last day of
February (that is, when the taxable benefit is
reported on the employee’s T4 slip).
How is the GST/HST applied when an employee’s
monthly fee for a fitness gym is paid
by the company? Similar to automobile benefits, when
an employer pays, reimburses, or subsidizes the cost
of memberships to a business or professional club
(that operates fitness, recreational, sports, or dining facilities
for the use of their members, but their
main purpose is something other than recreation), the
value of the employees’ taxable benefit will include
the GST/HST paid by the employer. At year-end,
the employer will be considered to have collected
GST/HST on the taxable benefit and must calculate
the amount of taxes due (see slide 7—calculated
the same way as the operating charge benefit).
The GST/HST due would then be reported on
the GST/HST return for the reporting period that
includes the last day of February (when a
taxable benefit is reported on the employee’s T4
slip).
What is the tax treatment on meal benefits?
In the cinema industry, we pay a caterer
to prepare meals for our technicians. The cost
of a caterer is added to the technician’s
pay as a taxable benefit. Most of the
technicians are employees, but some are self-employed subcontractors.
Similar to other benefits that is taxable for
GST/HST purposes, when an employer pays or reimburses
the cost of a meal, the value of
the employee’s taxable benefit will include the GST/HST
paid by the employer. At year-end, the employer
will have been deemed to have collected GST/HST
on the taxable benefit and must calculate the
amount of taxes due (see Slide 7—calculated the
same way as the operating charge benefit). The
GST/HST due would then be reported on the
GST/HST return for the reporting period that includes
the last day of February. In your question
you stated that the benefit was taxable and
added to the employee’s income. However, there may
be circumstances where a meal benefit would not
be considered taxable. Generally, if an employer provides
subsidized meals to an employee (such as in
an employee dining room or cafeteria), these meals
are not considered a taxable benefit if the
employee pays a reasonable charge. A reasonable charge
is one that covers the cost of food,
its preparation, and service. In the case of
subcontractors, meals would not be a taxable benefit
and could be part of a contract between
the parties. Let’s look at an example.
If the caterer’s cost is $1,000 and you
add 13% in GST/HST, the cost of the
benefit would be $1,130. If the caterer regularly
prepares meals for 10 technicians, you would divide
$1,130 by 10. You must then include $113
as a taxable benefit in the income of
each technicians that are employees.
My employee submitted a gym membership receipt for
50% co-pay reimbursement: $50.00 + $7.50 HST =
$57.50. Would my employee's taxable benefit be $28.75,
and could the company claim $3.75 HST as
an input tax credit? Yes, you would include
the HST in the taxable benefit, minus the
amount the employee reimbursed. Generally, a company cannot
claim an ITC for the GST/HST paid on
services you acquire in a participating province for
the exclusive personal consumption, use, or enjoyment (90%
or more) of an employee or an employee's
relative. For information on input tax credits, see
slide 3.
Are we required to include GST/HST on taxable
benefits for retirees based on the province they
reside in? When calculating the value of a
taxable benefit provided to a retiree, the employer
may have to include the GST/HST payable by
them. The GST/HST payable will be the amount
included in the payment made to a provider
of the goods or services that was received
by the retiree. At year-end, the employer will
be considered to have collected GST/HST on the
taxable benefit and must calculate the amount of
taxes due. The GST/HST due would then be
reported on the GST/HST return for the reporting
period that includes the last day of February
(that is when the taxable benefit is reported
on the retiree’s T4A slip).
Are there any HST implications on non-taxable meal
allowances? If a meal allowance is not taxable,
there are no HST implications.
If you are looking to expand your knowledge,
there are resources that can help: The Canada.ca
website. Pamphlet RC2, The Business Number and your
Canada Revenue Agency Program Accounts, provides in-depth information
about the business number and the CRA program
accounts, including the GST/HST program account. Guide RC4022,
General Information for GST/HST Registrants, is a resource
for new and existing registrants. Guide T4130, Employers’
Guide – Taxable Benefits and Allowances, includes a
benefits chart that shows the benefits for which
you have to include GST/HST.
With that, we have reached the end of
the webinar. A webinar on information about the
enhancement of the Canada Pension Plan will be
coming soon. Thank you for watching.