Date: June 2010

Subsequent to the release of the HST Bulletin dated May 4, 2010 on the "Treasury Board Authorities, Transition to HST in Ontario and British Columbia, New Place of Supply Rules and Increase to HST Rate in Nova Scotia", some departments have asked for clarification regarding the factors to use for the calculation of employee reimbursements and allowances pertaining to expenditures incurred prior to July 1, 2010.

The following clarification was provided by Canada Revenue Agency with respect to the calculation of GST/ HST on reimbursements and allowances.


The formula for the calculation of the GST/HST on allowances is found in the Excise Tax Act. (ETA) Pursuant to subsection 174(f) of the ETA a person is deemed to have paid, at the time the allowance is paid, tax in respect of the supply equal to the amount determined by the formula.

A multiplied by B divided by C.

A = amount of allowance

B = in prescribed circumstances relating to a participating province, the percentage determined in prescribed manner, and

C = total of 100% and the percentage determined for B.

Therefore, when an allowance is paid on or after July, 1 2010 the factors in effect as of July, 1, 2010 (5/105, 12/112, 13/113 and 15/115) are used regardless of whether the expenditure was incurred before July 1, 2010.


Travel takes place on June 30 in Ontario. A travel claim if filed on July 5th for a meal allowance only. As the allowance is paid after July 1, 2010 then the factor to use is 13/113 and not 5/105.


Section 175 of the Excise Tax Act addresses employee reimbursements. Paragraph 175(1) (c) is the provision that deems the employer to have paid the tax paid by the employee when the reimbursement is paid to the employee.

The tax paid by employee is determined by the formula: A multiplied by B


A = the tax paid by the employee, and

B = lesser of

(i) percentage of cost that is reimbursed, and
(ii) percentage of use of the property or service that is for consumption or use in commercial activities


An employee pays 5% GST on goods and/or services prior to July 1, 2010, and is subsequently reimbursed by the employer on or after July 1, 2010. The employer is deemed to have paid the 5 % GST paid by the employee prior to July 1, 2010. Therefore, if the employer uses the actual method to calculate the GST/HST, he would claim 5%. If the factor method is used, the factor rate would be 4/104.

TBS/OCG Inquiries

Financial Management Community: Should you require further information about this notice please contact Anna Marinelli CGA, Financial Management Policy Division, at 613-954-3692 or by e-mail at Contact Anna Marinelli by email:

Original signed by Bill Matthews

Assistant Comptroller General
Financial Management and Analysis Sector
Office of the Comptroller General

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