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About the GST/HST on benefits

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How GST/HST applies to benefits

GST/HST does not apply to:

Whether the GST/HST applies to an employee benefit or non-cash compensation (also called a fringe or employee taxable benefit) is largely based on whether the employee's benefit is taxable under the Income Tax Act.

Generally, if an employee benefit is taxable for income tax purposes, you are also considered to have made a supply of the property or service to your employee. If GST/HST applies to that property or service, you are considered to have collected the GST/HST on the benefit.

However, there are situations where you will not be considered to have collected the GST/HST on a taxable employee benefit.

Example

You bought a passenger vehicle from a non-registrant and made it available to your employee throughout 2022. The passenger vehicle is used more than 90% in the commercial activities of your business. You report the value of the benefit, including the GST/HST and if applicable, the PST, on the employee's T4 slip. For GST/HST purposes, you will be considered to have collected the GST/HST on this benefit even if you could not claim an ITC on the purchase of the passenger vehicle.

Property acquired before 1991 or from a non-registrant

If you acquired property before 1991, you did not pay the GST/HST. Also, you do not generally pay the GST/HST when you acquire property from a non-registrant. As a result, you cannot claim an ITC under these circumstances. However, if you make this property available to your employee and the benefit is taxable for income tax purposes, you may still be considered to have collected the GST/HST on this benefit.

Determine if you have to remit GST/HST on benefits

You have to remit GST/HST if it is considered to be collected on the taxable benefit.

Situation: GST/HST not considered collected

Situations where you are not considered to have collected the GST/HST on a taxable benefit provided to your employee:

  • The property or service that gives rise to the taxable benefit is GST/HST exempt or zero-rated
  • The taxable benefit results from an allowance included in the income of the employee under paragraph 6(1)(b) of the Income Tax Act
  • You are restricted from claiming an input tax credit (ITC) in the situations described in ITC restrictions  for the GST/HST paid or payable on the property and services that give rise to the taxable benefit
  • The property or service that gives rise to the taxable benefit is supplied outside Canada
Example

You, as an employer who is a GST/HST registrant, would like to reward an employee for outstanding performance, and you have agreed to pay for hotel accommodations and three meals a day, for one week, in London, England. An amount will be included in the income of the employee as a taxable benefit. However, you will not be considered to have collected tax in respect of the benefit provided to the employee, since the supplies were made outside of Canada.

If one of the conditions are met, you do not need to do GST/HST calculations.

Situation: GST/HST not considered collected, automobile or motor vehicles

Under the Excise Tax Act, you are not considered to have collected the GST/HST if you make an election by filling out Form GST30, Election for Passenger Vehicles or Aircraft to be Deemed to be Used Exclusively in Non-Commercial Activities (or state in writing the information required on the form) and one of the following conditions apply:

  • You are an individual or a partnership and the passenger vehicle or the aircraft that you have bought is used less than 90% in the commercial activities of the business
  • You are not an individual, a partnership, or a financial institution, and the passenger vehicle or the aircraft that you bought is used 50% or less in the commercial activities of the business
  • You are a financial institution and choose to treat the passenger vehicle or the aircraft you lease or have bought as being used only in non-commercial activities of the business
  • You are not a financial institution and you lease the passenger vehicle or the aircraft which you use 50% or more in non-commercial activities of the business, and you choose to treat it as being used 90% or more in such non-commercial activities

You do not have to send the Form GST30 to the CRA. You must keep this form in your records in case you are asked for it.

 If one of the conditions are met, you do not need to do GST/HST calculations.

Learn more if you need to remit GST/HST based on your situation:

When to remit and file GST/HST returns

GST/HST calculated on benefits must be remitted as follows:

  • Employee benefits

    Last day in February of the year after the year you provided the benefit (this is also the deadline for distributing T4 slips to your employees)

  • Shareholder benefits

    Last day in June of the year after the year you provided the benefit

  • Reimbursements made by employees (or their relatives) on benefits

    Same time the GST/HST return is due for the reporting period that includes the date of the reimbursement

You have to report the GST/HST for those taxable benefits on your GST/HST return using line 105 (or line 103 if you are filing by paper).

Example

You are a GST/HST registrant and have a monthly reporting period.

You calculated the taxable benefits, including any GST/HST and PST, for each pay period during 2022 the benefits were provided to your employees. You are considered to have collected the GST/HST on those taxable benefits on February 28, 2023.

You have to report the GST/HST for those taxable benefits on your GST/HST return for the reporting period that includes the last day of February 2023, using line 105 (or line 103 if you are filing by paper).

Can you claim input tax credits (ITCs) on benefits

As a GST/HST registrant, you can claim an ITC to recover the GST/HST paid or payable on the purchases and operating expenses related to your commercial activities. Generally, commercial activities include the making of supplies of taxable property and services.

For employee benefits, you can usually claim an ITC for the GST/HST paid or payable on property and services you supply to your employees or their relatives as a benefit if it is related to your commercial activities.

ITC restrictions

In some situations, you will not be able to claim an ITC for the GST/HST paid or payable for property or services that give rise to taxable benefits you provide your employees.

If you cannot claim an ITC for the GST/HST paid or payable for property or services that give rise to a taxable benefit due to the restrictions described in one of the following paragraphs, you are not considered to have collected the GST/HST. You do not have to remit the GST/HST on that benefit.

Club memberships

You may pay or reimburse fees for membership to any club whose main purpose is to provide dining, recreational, or sporting facilities. In such cases, you cannot claim an ITC for the GST/HST paid or payable, regardless of whether the club membership fees or dues are a taxable benefit for the employee for income tax purposes.

However, you can claim ITCs for the GST/HST paid or payable on such memberships if you acquire the memberships exclusively for supply in the ordinary course of a business of supplying them.

Exclusive personal use

You cannot claim an ITC for the GST/HST paid or payable on property or services you acquire, import, or bring into a participating province for the exclusive personal consumption, use, or enjoyment (90% or more) of an employee or an employee's relative.

However, you can claim an ITC in the following situations:

  • The consumption, use, or enjoyment of the property or service by the employee or their relative does not give rise to a taxable benefit for income tax purposes and no amounts were payable by the employee for this benefit. The most common type of non-taxable benefit is the paying of moving expenses by an employer.
  • During the same GST/HST reporting period, you make a supply of the property or service to an employee or their relative for consideration that becomes due in that period and that is equal to its fair market value
Property supplied by way of lease, licence, or similar arrangement

You cannot claim an ITC for the GST/HST paid or payable on property supplied by way of lease, licence, or similar arrangement that is more than 50% for the personal consumption, use, or enjoyment of one of the following:

  • You are an individual, yourself or another individual related to you
  • You are a partnership, an individual who is a partner or another individual who is an employee, officer, or shareholder of, or related to, a partner
  • You are a corporation, an individual who is a shareholder or another individual related to the shareholder
  • You are a trust, an individual who is a beneficiary or another individual related to the beneficiary

However, you can claim an ITC if, during the same GST/HST reporting period, you make a taxable supply of the property to that individual for consideration that becomes due in that period and that is equal to its fair market value.

What to do if you have employees whose province of employment is Quebec

In Quebec, Revenu Québec administers the GST/HST unless you are a person that is a selected listed financial institution (SLFI) for GST/HST or QST purposes or both.

If you pay your employee remuneration or other income and their province of employment is Quebec, as well as deducting federal income tax, you will have to remit the GST/HST to Revenu Quebec.

Learn more if the physical location of your business is in Quebec: GST/HST and QST | Revenu Québec

References

Related

Legislation

ETA: 142
Place of supply
ETA: 166
Application of tax
ETA: 169
General rules for input tax credits
ETA: 173
Taxable benefit is considered a supply for GST/HST purposes
ETA: 173(1)(b)
ITC restrictions – property or services exclusively for the personal use, consumption or enjoyment of an individual
ETA: 173(1)(c)
Supply of property otherwise than by way of sale
ETA: 173(1)(d)
Exclusions
ETA: 173(1)(d)(i)
ITC restrictions under section 170
ETA: 173(1)(d)(vi)(A)
Calculating the tax for automobile operating cost benefit
ETA: 173(1)(d)(vi)(B)
Calculating the tax for standby charge benefit
ETA: 173(2)
Election in effect to forego ITCs
ETA: 173(3)
Effect of the election
ETA: 221
Requirement to collect tax
ETA: 225(4)
Time limits for input tax credits
ETA: 228
Remitting net tax
ETA: Schedule V
Exempt supplies
ETA: Schedule VI
Zero-rated supplies

ITC restrictions

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