Before January 1st, 2018, large businesses were subject to restrictions on obtaining input tax refunds ("ITRs") on certain expenditures.
The gradual elimination of these restrictions has started on January 1st, 2018. A new step will be taken on January 1st, 2019, since the percentage to which they will be entitled will pass from 25% to 50% of the restricted ITRs.
Typically, large businesses are those whose taxable and zero-rated revenues are greater than $10 million during their last fiscal year. The threshold amount is calculated by including the revenue related to supplies made by the company and its associated companies.
Restricted QST expenditures for large businesses are essentially as follows:
- Motor vehicles weighing less than 3,000 Kg;
- Gasoline used by these vehicles;
- Telecommunication services with the exception of “1-800” numbers or internet services; and
- Food, beverages and entertainment deductible at 50%, for income tax purposes.
The phase out will occur as follows:
For example, a large corporation acquiring in 2019 a telecommunication service valued at $100 may claim 50% of the QST paid for this service ($ 9.98 * 50% = $4.99).
Otherwise, the general limitations applicable to the granting of an ITR will continue to apply in conjunction with the phase-out percentages (e.g., the $30,000 value limit in respect to passenger vehicles, or the 50% limitation in respect of food, beverages or entertainment expenses).
For further information, please contact Pierre Nadeau, Indirect Tax manager or your trusted Mazars advisor.