Subsection 175(1)
Administrative Policy
18 May 2018 Interpretation 183321
Volunteers of the New Brunswick Charity incur expenses in relation to the activities of the Charity and submit expense reports with receipts attached for mileage travelled and purchases made to carry out the Charity's charitable purposes. Some volunteers prefer to be reimbursed by cheque, while others prefer to donate these expenses to the Charity and receive an official donation receipt at year end. Can the Charity claim a public service bodies' (PSB) rebate where it: (1) reimburses a volunteer for their expenses; (2) pays an allowance to a volunteer, such as an allowance for mileage travelled; (3) pays a reimbursement or an allowance to a volunteer, but the volunteer later returns the payment to the Charity, or (4) issues an official donation receipt for a gift-in-kind of the expense?
After addressing the first two questions with a general discussion of ss. 175 and 174, CRA turned to the third question and stated:
The payment of the reimbursement or the allowance by the Charity and the later donation of all or part of this amount back to the Charity are two separate transactions for GST/HST purposes. If all the conditions of section 175 or section 174 are met, the tax deemed to have been paid is included in the calculation of the non-creditable tax charged in respect of the property or service for the claim period. … The fact that the volunteer later donates all or a part of the payment back to the Charity does not impact the Charity's PSB rebate entitlement.
Respecting the gift-in-kind, CRA stated:
For section 175 to apply, the Charity must pay an amount to the volunteer as a reimbursement. In this situation, the Charity does not actually pay an amount to the volunteer. Rather, the volunteer donates their right to reimbursement to the Charity as a gift-in-kind. Therefore, section 175 does not apply and the Charity cannot claim a PSB rebate … .
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Excise Tax Act - Section 174 - Paragraph 174(a) - Subparagraph 174(a)(iv) | allowance recognized even though subsequently donated back to charity | 117 |
8 March 2018 CBA Commodity Tax Roundtable, Q.8
A candidate identified by an executive recruitment firm is required to travel from Los Angeles to meet in Toronto with the consultants at the executive firm or with the client, and incurs travel and meal expenses for which the candidate is reimbursed by the firm after submitting receipts, with such reimbursed expenses then being invoiced to the client in accordance with the engagement agreement. Will CRA view the candidates as a volunteer for the purpose of s. 175? In indicating that s. 175 would be unavailable, CRA stated:
[T]he candidate is not a volunteer giving service to the firm. Based on the information provided, the only connection between the firm and the candidate appears to be the seeking of a future employment opportunity.
10 January 2018 Interpretation 139614
Employers sponsor group medical and dental plans for the benefit of their employees, which qualify as a private health services plans (PHSPs), as described in IT-339R2. The PHSPs are self-insured programs with all claims adjudicated and paid by a third party professional plan administrator on behalf of the employer, who retains the legal and financial liability to pay for the plan benefits. Where a payment is made to an employee in satisfaction of a claim made under a PHSP in respect of a taxable supply of property or a service (for example, massage therapy), would s. 175 allow the employer to claim an input tax credit respecting the tax paid by their employees on their taxable purchases of the health care services and products?
In finding that s. 175 would generally not so apply, CRA stated:
For purposes of section 175, in order for the consumption or use of the property or service by the employee to be considered to relate to the activities of the employer, there must be a direct connection between the consumption or use of the property or service and the activities engaged in by the employer.
[S]ince a medical or dental service is acquired by an employee in relation to his or her personal health and well-being, there would not be a direct connection between the service and the activities of the employer. Therefore, while the making of a payment in satisfaction of a PHSP claim may itself relate to the activities of the employer, the employee’s acquisition of a service such as massage therapy does not.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Financial Service - Paragraph (f.1) | employer payments to PHSP were exempt | 300 |
23 March 2017 CBA Commodity Taxes Roundtable, Q.18
A partner in a registrant law firm (Great Law Firm LLP ) acquires a new computer primarily for use in its commercial activities using his personal credit card and, after presenting his receipt and credit card bill, is reimbursed, including the $252.07 he paid in GST/HST. Can the law firm claim an input tax credit (ITC) of $252.07, supported only by the receipt and its records for the partner’s reimbursement for these charges? Does it make any difference if the individual is an employee? CRA responded:
[U]nder subsection 175(1) … Great Law Firm LLP would be deemed to have paid, at the time the reimbursement is paid to the partner, tax in respect of the supply of the MacBook Pro equal to the total amount of tax reimbursed. As Great Law Firm LLP is a GST/HST registrant, it may claim an ITC, under subsections 169(1) and 199(2) of the ETA for the GST/HST paid by the partner.
...With respect to the documentary evidence, as Great Law Firm LLP is deemed to have acquired the Apple MacBook Pro, no additional supporting documentation is required where subsection 175(1) applies. Documentation identifying the partner, rather than the partnership, should satisfy the documentary requirements.
[T]he comments provided [above] would also apply to a reimbursement made … to its employee.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Excise Tax Act - Regulations - Input Tax Credit Information (GST/HST) Regulations - Section 3 - Paragraph 3(c) - Subparagraph 3(c)(ii) | invoice in partner's name satisfactory where s. 175 reimbursement | 55 |
GST/HST Memorandum 13.5 Non-creditable Tax Charged January 2017
Application to a charity
70. ...
Example 16 – Volunteer reimbursement
In a claim period, a volunteer of a charity rented a car in Ontario while attending two days of meetings as a representative of the charity. Since the volunteer was not returning home after the meetings, but was taking a three day vacation, the car rental agreement was for a five-day period. The volunteer paid $200 plus $26 in HST ($200 × 13%) for the car rental. The charity reimbursed the volunteer for the car rental, including the HST, in respect of the meetings. The percentage reimbursed was 40% (2/5 × 100%), which was the two days' use during the meetings of the five-day car rental.
Pursuant to section 175, the charity is deemed to have received a supply of the car rental, and the use of the car by the volunteer for the two days is considered to be use by the charity.
The tax the charity is deemed to have paid in respect of the supply is equal to
A × B
where
A is $26 – that is, the tax paid by the volunteer,
B is 40% which is the lesser of
- 40% – that is, the percentage of the cost to the volunteer that was reimbursed, and
- 40% – that is, the extent expressed as a percentage to which the rental of the car was acquired for use in relation to activities of the charity.
Therefore, the tax deemed paid by the charity for the car rental is equal to $10.40 ($26.00 × 40%). The federal part of the HST deemed paid is $4.00 ($10.40 × 5/13). This amount is included in subparagraph 259(1)(a)(iv) when calculating the federal non-creditable HST charged in respect of the supply for the claim period. The provincial part of the HST deemed paid is $6.40 ($10.40 × 8/13). This amount is included in subparagraph 259(1)(a)(iv) when calculating the provincial non-creditable HST charged in respect of the supply for the claim period.
GST/HST memorandum 9.4 "Reimbursements" June 2012
15. However, if a person is an employee, a partner or a volunteer at the time the property or service is acquired, imported or brought into a participating province, it is not necessary that the person still be an employee, partner or volunteer at the time of the reimbursement.
Agents
16. If the employee, partner or volunteer was acting as an agent for the employer, partnership, charity or public institution at the time the individual acquired, imported or brought into a participating province property or services, section 175 does not apply to the reimbursement. Instead, as the employer, partnership, charity or public institution would be considered to be the recipient of the supply, the usual rules for determining whether that person was eligible to claim ITCs or rebates would apply.
Executor of an estate s 267 and 267.1
17. ...Provided that the individual acquired, imported or brought into a participating province property or services at the time that the person was an employee, partner or volunteer, any reimbursement to the estate of the deceased individual could be subject to the rules in section 175. ...
Reimbursements to employees of other companies
18. Where a company (Company A) reimburses the employees of another company (Company B) for expenses that these employees incurred as a result of a contract Company B entered into with Company A, Company A is not entitled to use section 175 for these reimbursements. There is no employer – employee relationship between Company A and the employees of Company B. Rather, the reimbursements would be consideration for a supply.
"In relation to"
21. It is a question of fact whether the consumption or use of the property or service is "in relation to" the activities of the employer, partnership, charity or public institution. However, there must be a direct connection between the consumption or use of the property or service and the activities engaged in by the person.
Credit card expenses..
34. The CRA allows a person who is an employer, a partnership, a charity or a public institution to use a factor approach [12/112 in Ontario] to calculate ITCs or rebates in respect of the tax deemed paid by the person on purchases made by the person's employees, partnership members or volunteers where credit cards have been used to make purchases. The use of factors is intended to simplify the administrative burden persons have because credit card receipts are often a one sum total and include gratuities and provincial sales tax (PST). The choice of using the factor approach is an option for a person. Some persons may prefer to use the exact calculation method.
P-075R, 6 July 2004 "Allowances and Reimbursements"
In contrast [to an allowance], a reimbursememt is a payment made by one person to repay another person for amounts spent. An amount constitutes a reimbursement where the amount is fully accounted for by the person receiving the payment (i.e., evidenced by supporting vouchers or records).
Paragraph 175(1)(b)
Cases
Westcoast Energy Inc. v. Canada, 2022 FCA 57
Westcoast reimbursed (through Manulife as its agent) employees who had incurred various health care services – including some which were GST/HST-taxable, namely, acupuncture, massage therapy, naturopathy and homeopathy services. On appeal, Westcoast did not challenge the finding below that the employees were the recipients of such taxable services, so that Westcoast did not satisfy the requirement in s. 169, for generating input tax credits (ITCs) for the tax, of having acquired such services. However, Westcoast submitted, contrary to the finding below, that the employees should be considered to have consumed or used the services “in relation to activities of [Westcoast]” so as to generate ITCs under s. 175(1)(c).
Stratas JA agreed with the Tax Court below that ExxonMobil, which had held (at para. 50 thereof) under the similar wording of s. 174 that “property or services which are intended by the employer for the exclusive personal use of the employees and which lend themselves to such a use bear no relationship with the employer’s activities” also applied here in the context of s. 175, such that if “an employer reimburses for a service or property that is for the exclusive personal use of employees, the employer will not enjoy the deeming effect of subsection 175(1).” Accordingly, no ITCs were generated to Westcoast under s. 175.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Excise Tax Act - Section 170 - Subsection 170(1)) - Paragraph 170(1)(b) - Subparagraph 170(1)(b)(ii) | s. 170(1)(b)(ii) did not apply to reimbursed employee health care services as the services were acquired by the employees rather than the employer | 201 |
See Also
IWK Health Centre v. The King, 2025 TCC 44
The appellants, which were Nova Scotia health authorities operating hospitals, through the administrator of a health care plan, reimbursed their employees for their costs including HST of acupuncture, massage therapy, naturopathy, or homeopathy services. The appellants took the position that they were deemed by s. 175 to have received these care services themselves and claimed public service body (PSB) rebates accordingly.
After indicating (at para. 27) that the only “notable difference” between this case and Westcoast Energy was that in Westcoast Energy the “appellant sought to use the deeming effect of subsection 175(1) as a basis for claiming input tax credits rather than the public service body rebate,” Wong J went on to find that here s. 175(1) did not apply, stating (at paras. 30 – 31):
Here, the Services are of a particularly personal and individual nature, designed to be consumed by the person purchasing the supply. …
[I]t is difficult to reasonably conclude that the Services were used by the appellants’ employees in the course of their employment activities, as I would expect them to access these types of services on their personal time. … [T]he connection between the use of the Services and the employee’s employment activities is even more tenuous when the employee’s family member receives the supply. In these circumstances, it cannot be concluded that the Services are for consumption or use in relation to the appellants’ activities.
Westcoast Energy Inc. v. The Queen, 2020 TCC 116 (Informal Procedure), aff'd 2022 FCA 57
The appellant (“Westcoast”), which carried on a natural gas distribution business and which had agreed with its employees to provide extended health benefits, reimbursed them (through an agent (“Manulife”)) for the costs of the provision to them and family members of acupuncture, massage therapy, naturopathy and homeopathy services (the “Subject Services”). Sommerfeldt J first found that the employees rather than Westcoast were the recipients of such services. Thus, whether Westcoast was eligible for input tax credits for the HST charged to the employees on the Subject Services turned in part as to whether s. 175 deemed Westcoast to have received the Subject Services.
Sommerfeldt J found the following test (enunciated under ExxonMobil as applicable under s. 174 to an allowance) was also applicable in determining whether s. 175(1)(b) applied to the reimbursement:
[P]roperty or services which are intended by the employer for the exclusive personal use of the employees and which lend themselves to such a use bear no relationship to the employer's activities. In contrast, property or services which can be used by the employees in the course of their employment activities, and which are intended for such a use, are in relation to the employer's activities.
In finding that the first test above was satisfied, he stated (at paras 60):
Given that the Subject Services pertained to acupuncture, massage therapy, naturopathy and homeopathy, it seems to me that those services were intended for the exclusive personal use of Westcoast’s employees or their family members. …
… Neither Manulife nor Westcoast asked a health care provider to provide health care services to an employee of Westcoast, nor did Westcoast arrange for health care services to be provided on its premises. Westcoast was not made aware of the specific health care services provided to its employees or their family members … .
In further finding that the second test above was not satisfied, he stated (at para. 65):
I have difficulty in comprehending how an employee of Westcoast could be said, while receiving acupuncture, massage therapy, naturopathy or homeopathy services, to be consuming or using the particular service in the course of his or her employment activities, as distinct from an activity that was personal in nature. The connection of the consumption or use of the Subject Services to the course of the employee’s employment activities is even more tenuous and remote in the situation where a spouse or a child of the employee received a Subject Service.
In dismissing Westcoast’s appeal he concluded (at para. 69):
Westcoast has failed to demonstrate a relationship between its activities and the consumption or use of the Subject Services by its employees and their families, as required by subsection 175(1) … .
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Recipient | employees rather than employer were the recipients of health care services even where the employer paid the health care provider directly | 331 |
| Tax Topics - Excise Tax Act - Section 170 - Subsection 170(1)) - Paragraph 170(1)(b) - Subparagraph 170(1)(b)(ii) | s. 170(1)(b)(ii) exception conceded to apply | 221 |