On October 25, 2017, the government of Québec issued Interpretation and Administrative Bulletin TVQ. 206.1-10, “Particulars regarding the phasing out of the ITR restrictions applicable to large businesses that is to begin on January 1, 2018” to outline the rules for the phase-out of input tax refund (“ITR”) restrictions for large businesses, as announced in the 2015 Québec budget.
Large businesses will be eligible to claim ITRs for QST payable in relation to restricted expenses that become payable as of January 1, 2018, at the rate of 25%. This recovery rate will increase to 50% on January 1, 2019; to 75% on January 1, 2020; and these restrictions will be eliminated entirely, allowing full input tax refunds to be claimed, commencing on January 1, 2021.
The bulletin addresses the rules for claiming an ITR on restricted expenses, which include:
- road vehicles weighing less than 3,000 kg and that must be registered under the Highway Safety Code to travel on public highways;
- gasoline used to power engines of a restricted road vehicle;
- any property or service (improvement) relating to a restricted road vehicle that is acquired or brought into Québec within 12 months after the vehicle was acquired or brought into Québec;
- electricity, gas, combustibles or steam not used to produce movable property (i.e., goods) intended for sale;
- telecommunication services, other than 1-800 services and Internet services; and
- food, beverages or entertainment subject to the 50% deductibility limitation under the Taxation Act.
Examples for calculating ITRs on several of the restricted expenses noted above are included in the bulletin.