Gradual phasing out of ITR restrictions

gradual-phasing-out-of-itr-restrictions

Starting January 1, 2018, input tax refund (ITR) restrictions for large corporations will be phased out over a period of three (3) years. As a rule, for QST purposes, a large corporation comprises a corporation whose annual taxable supplies for the previous fiscal year, including those of related businesses, top $10,000,000.

Under the current rules, large QST-registered corporations cannot claim ITRs for certain current expenses, including:

  • Road vehicles under 3,000 kg that need to be licensed for use on public roads
  • Gasoline used to fuel such a vehicle
  • Any improvement made to these road vehicles within 12 months of its acquisition or rental
  • Electricity, gas, fuel or steam used for purposes other than the production of movable goods for sale
  • Telephone and other communication services other than 1-800 numbers and internet services, and
  • Costs related to food, beverages and entertainment limited to a 50% deduction for income tax purposes.

Rate changes effective as of 2018:

Year Admissible portion of ITR
on a limited expense
2018 25%
2019 50%
2020 75%
2021 and subsequent years 100%

Because of these changes, Revenu Québec has announced a range of transitional rules to be introduced into QST legislation so they align with GST and income tax rules.

For more information, contact us.