[?] Subscribe To The Bookkeeping Blog

XML RSS
Add to Google
Add to My Yahoo!
Add to My MSN
Subscribe with Bloglines

Home

The Tea Break The Forum
The Questions
The Blog
The Support
The "Tea" Shoppe

The Bookkeeping The Practice
The Data Entry
The Training
The System
The Plan

The Tax - Canada The Tax
The Handy Reference
The Compliance
The GST HST

The Tax - U.S. The Tax Info
The U.S. News

The Search The Big Picture
The Tips
The Help

The Back Office Contact/Meet Me
Site Policies

GST on Mileage

by Tim
(Ottawa, Ontario, Canada)

When charging mileage as a disbursement to a client I have to collect GST. I charge the current treasury board rate.

To calculate the GST to be charged to the client for this disbursement do I calculate GST by adding 5 % to the treasury board rate? Or does the treasury board rate already contain the GST, in which case I would subtract out 5% to get the proper GST number?

Thanks,

Tim




Hi Tim,

It is my understanding that government travel allowance rates build the GST into the rates. This means you would bill the client the treasury board rate divided by 1.05 . The 5% GST collected would be on that invoiced amount. This ensures you are only "recovering" the treasury board rate.

For example, the treasury board rate at January 1, 2010 for Ontario is 54.5 cents / km. Their chart states it includes taxes. So your calculation would be 54.5 / 1.05 = 51.9 (invoiced amount) x 5% GST = 2.6 (GST collected).

From the expense side, if your employees use their personal vehicle for business purposes, there are published tax rate deduction limits for the tax-exempt portion of allowances that CRA considers reasonable. These rates are NOT the same as the treasury board rates.

Thanks for the question. :0)

See you on the next page .... Your tutor Lake

Comments for
GST on Mileage

Click here to add your own comments

Jan 20, 2010
 GST on Mileage
by: Lake

Hi Tim,

I should have included this when I responded to your question earlier.

I think this link might also interest you. It was a similar question to yours.

Question:

As an incorporated business we have chosen to use our personal vehicle for business and charge $.52/km for mileage. Most of our contracts cover travel expense and we bill this mileage to clients.

Does the $.52/km include GST? Can we claim GST tax credits on this expense when paid to us personally?
Jul 13, 2010
 Charging and Paying Mileage
by: Anonymous

To further ask in regards to this mileage, and now with the HST in BC...

We are invoicing a client for mileage of our employees, and in turn paying our employee what we bill, without any markup.

Do we charge our client HST, and submit to the gov't? and only pay our employee the mileage? And is it only a Taxable Benefit when our employee earns $5000?

This is all very confusing!

I appreciate your input.
Jul 14, 2010
 HST input tax credits on auto allowances
by: Bookkeeping Essentials

Here is my understanding of how it works:

Section 174 of the Excise Tax Act deals with GST/HST input tax credits on auto allowances. CRA publication G400-3-11 Allowances and Reimbursements item 13 states:

When a GST/HST registered employer pays a reasonable allowance to an employee for the use of a motor vehicle in Canada, and no amount is included in computing the individual's income for income tax purpose, the employer is deemed to have paid tax equal to the ITC of the amount of the reasonable allowance.

It is my understanding that as of July 1, 2010, the ITC that can be claimed is:

5/105 if you are in a non-participating province
13/113 in a participating province other than BC and Nova Scotia
12/112 in BC
15/115 in Nova Scotia

As per a ruling from the Vancouver office , CRA does not care what your business bills your client for these expenses.

The CRA reasonable allowance of $0.52/km includes GST/HST. Therefore if you are not marking up the allowance charged the client, you would back out the HST as follows:

$0.52 / $1.12 BC HST = $0.46 = amount to bill client before charging HST

This is a good deal for the employer as the HST ITC is greater than the GST ITC.

If you go to the CRA publication T4130 Employers' Guide - Taxable Benefits and Allowances, if the allowance is reasonable, it is not taxable. The portion of the allowance that is over what CRA considers reasonable is a taxable benefit.

I would extrapolate that to mean that only the reasonable allowance portion is eligible for the ITC.

Hope this helps. If at any time I find out any of the above changes, I will post back here.
Aug 27, 2010
 Charging and Paying Mileage and Incidentals
by: Anonymous

Hi,

Now I understand that I should charge HST on mileage. My question is can I claim ITCs if my employee claimed $100 mileage? Does mileage rule apply to Incidentals as well?

Thank you

Lei
Aug 27, 2010
 HST On Mileage
by: Bookkeeping-Essentials

Hi Lei,

Follow the links in the post above yours.

Just a point ... you do not charge HST on mileage, it is included in CRA's "reasonable allowance" amounts.

As stated above, an employer can claim ITCs on the mileage allowance paid to the employee.

As explained in Employee Auto Allowance Tax Rates:

Reimbursement of toll or ferry charges or supplementary business insurance is acceptable provided you did not calculate your allowance to include these reimbursements.

The allowance should only be paid on the business kilometers and the employee should NOT be reimbursed for expenses related to operating the vehicle as this allowance is meant to cover those costs.

You haven't told me what kind of incidentals. If it is personal expenses paid by the employee while doing business for you, the employee should submit an expense report with all receipts attached.

If you are still unsure of your situation, you should call CRA for confirmation.

Click here to add your own comments


footer for bookkeeping page