Canada: Taxable Benefits And The GST/HST

Last Updated: February 16 2017
Article by Daryl Hooley and Betsy Qin

It's that time of year again – as an employer, what should you know about taxable benefits and the GST/HST? Did you know the GST/HST impacts not only the calculation of certain employee taxable benefits, but also the calculation of the employer's net tax for GST/HST reporting purposes?

Tax deemed collected

The treatment of the GST/HST for employee taxable benefits under section 173 (note* all legislative references are to the Excise Tax Act) largely follows their treatment under the Income Tax Act. Generally, where a benefit is taxable for income tax purposes, the employer that is a GST/HST registrant (registrant employer) is considered to have made a supply of the property or service that gave rise to that benefit to the employee and is deemed to have collected tax on the value of the benefit amount.

The registrant employer is required to report and remit this tax annually (see the filing and remittance section below). Note that the employee does not pay the GST/HST, as it is already included in the calculation of the taxable benefit reported on the employee's T4 or T4A slip.

Section 173 effectively ensures that the GST/HST cost is borne by the employee, rather than the registrant employer. However, as with any rule, there are exceptions. The registrant employer is not considered to have collected tax under section 173 in these situations:

  • The supply of the property or service that gave rise to the taxable benefit is exempt or zero-rated for GST/HST purposes or is supplied outside of Canada;
  • The registrant employer is restricted from claiming an input tax credit ("ITC") under section 170 on the GST/HST paid or payable on the property or service that gave rise to the taxable benefit;
  • The taxable benefit is in respect of an allowance that is included in the income of an employee under paragraph 6(1)(b) the ITA;
  • The registrant employer is an individual or partnership and the GST/HST paid is in respect of a passenger vehicle or the aircraft that is not used exclusively (90% or greater) in the registrant's commercial activities; or
  • The registrant employer is not an individual, partnership or financial institution and the GST/HST paid is in respect of a passenger vehicle or the aircraft that is not used primarily (50% or greater) in the registrant's commercial activities.

Value of the benefit

The value of the benefit for GST/HST purposes is generally the amount reported on the T4 or T4A slip for the taxable benefit. If the taxable benefit is for a standby charge or the operating expense of an automobile, the value of the benefit for GST/HST purposes also includes the amount, if any, that the employee or the employee's relative reimbursed the employer for that benefit. As a result, if the employee fully reimburses the employer an amount equal the entire standby charge or operating expense benefit such that there is no benefit amount to be reported on the T4 or T4A slip, then the value of the taxable benefit for GST/HST purposes would be the amount of the reimbursement.

Calculation of tax

The GST/HST deemed to have been collected by the registrant employer is calculated based on the value of the benefit for GST/HST purposes multiplied by one of the following applicable factors:

Table 1: Employee benefit factors (2016)
Benefits other than auto operating expenses benefit Automobile operating expenses benefit
ON 12/112 9%
NL, NB 14/1141 11%2
NS 14/114 11%
PEI 14/1143 11%4
Non-participating provinces 4/104 3%

Due to the requirement to recapture input tax credits for the provincial part of the HST paid or payable on specified property and services acquired or brought into Ontario or PEI for consumption or use in those provinces, a registrant employer that is a "large business" (typically, with sales greater than $10 million in fiscal year preceding the recapture period) may be subject to different factors on those specified property and services, which includes qualifying motor vehicles and fuel.

If you are a large business for the purposes of the RITC requirement at December 31, 2016, the following rates should be used:

Table 2: Large businesses – Employee benefit factors
Benefits other than auto operating expenses benefit Automobile operating expenses benefit
ON 4/104, 6/106 or 8/1085 7.2%
PEI 4/104 6.63%

Input tax credit

A registrant employer is eligible to claim an ITC in respect of GST/HST paid or payable on purchases to the extent that the amount was in respect of "an acquisition, importation or bringing into a participating province of property or services for consumption or use in relation to the activities of the person." This generally includes the GST/HST paid or payable on property or services the registrant employer supplies to an employee as a taxable benefit, if it is related to the employer's commercial activities.

Filing and remittance

The registrant employer is deemed to have collected the GST/HST on a taxable benefit on the last day of February in the year following the taxation year. For instance, the GST/HST with respect to an employee's taxable benefit supplied during the year ended December 31, 2016 is reported on the GST/HST return of the registrant employer for the reporting period that includes February 28, 2017.


1. 12/112 prior to July 1, 2016

2. 9% prior to July 1, 2016

3. 13/113 prior to October 1, 2016

4. 10% prior to October 1, 2016

5. 4/104, if the recapture rate was 100% on the last day of the reporting period in which you reported the RITC; 6/106, if the recapture rate was 75%; and 8/108 if the recapture rate was 50%

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Daryl Hooley
Betsy Qin
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