Excise Tax Act (R.S.C., 1985, c. E-15)

Allowances and Reimbursements

Marginal note:Travel and other allowances

174 For the purposes of this Part, where

• (a) a person pays an allowance

  • (i) to an employee of the person,

  • (ii) where the person is a partnership, to a member of the partnership, or

  • (iii) where the person is a charity or a public institution, to a volunteer who gives services to the charity or institution

  for

  • (iv) supplies all or substantially all of which are taxable supplies (other than zero-rated supplies) of property or services acquired in Canada by the employee, member or volunteer in relation to activities engaged in by the person, or

  • (v) the use in Canada, in relation to activities engaged in by the person, of a motor vehicle,

• (b) an amount in respect of the allowance is deductible in computing the income of the person for a taxation year of the person for the purposes of the Income Tax Act, or would have been so deductible if the person were a taxpayer under that Act and the activity were a business, and

• (c) in the case of an allowance to which subparagraph 6(1)(b)(v), (vi), (vii) or (vii.1) of that Act would apply

  • (i) if the allowance were a reasonable allowance for the purposes of that subparagraph, and

  • (ii) where the person is a partnership and the allowance is paid to a member of the partnership, if the member were an employee of the partnership, or, where the person is a charity or a public institution and the allowance is paid to a volunteer, if the volunteer were an employee of the charity or institution,

  the person considered, at the time the allowance was paid, that the allowance would be a reasonable allowance for those purposes and it is reasonable for the person to have considered, at that time, that the allowance would be a reasonable allowance for those purposes,

the following rules apply:

• (d) the person is deemed to have received a supply of the property or service,

• (e) any consumption or use of the property or service by the employee, member or volunteer is deemed to be consumption or use by the person and not by the employee, member or volunteer, and

• (f) the 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 × (B/C)

  where

  A

  is the amount of the allowance,

  B

  is

  • (i) in prescribed circumstances relating to a participating province, the percentage determined in prescribed manner, and

  • (ii) in any other case, the rate set out in subsection 165(1), and

  C

  is the total of 100% and the percentage determined for B.

Marginal note:Employee, partner or volunteer reimbursement

• 175 (1) Where an employee of an employer, a member of a partnership or a volunteer who gives services to a charity or public institution acquires or imports property or a service or brings it into a participating province for consumption or use in relation to activities of the employer, partnership, charity or public institution (each of which is referred to in this subsection as the “person”), the employee, member or volunteer paid the tax payable in respect of that acquisition, importation or bringing in and the person pays an amount to the employee, member or volunteer as a reimbursement in respect of the property or service, for the purposes of this Part,

  • (a) the person is deemed to have received a supply of the property or service;

  • (b) any consumption or use of the property or service by the employee, member or volunteer in relation to activities of the person is deemed to be consumption or use by the person and not by the employee, member or volunteer; and

  • (c) the person is deemed to have paid, at the time the reimbursement is paid, tax in respect of the supply equal to the amount determined by the formula

    A × B

    where

    A

    is the tax paid by the employee, member or volunteer in respect of the acquisition, importation or bringing into a particular province of the property or service by the employee, member or volunteer, and

    B

    is the lesser of

    • (i) the percentage of the cost to the employee, member or volunteer of the property or service that is reimbursed, and

    • (ii) the extent (expressed as a percentage) to which the property or service was acquired, imported or brought into the province, as the case may be, by the employee, member or volunteer for consumption or use in relation to activities of the person.

• Marginal note:Exception

  (2) Subsection (1) does not apply to a reimbursement in respect of property or a service acquired, imported or brought into a participating province by a member of a partnership where paragraph 272.1(2)(b) applies to the acquisition, importation or bringing in, as the case may be, and the reimbursement is paid to the member after the member files with the Minister a return of the member under section 238 in which an input tax credit in respect of the property or service is claimed.

Marginal note:Warrantee reimbursement

175.1 Where

• (a) the beneficiary of a warranty (other than an insurance policy) in respect of the quality, fitness or performance of tangible property acquires or imports property or a service or brings it into a participating province and tax is payable by the beneficiary in respect of the acquisition, importation or bringing in, and

• (b) a registrant pays to the beneficiary, under the terms of the warranty, an amount as a reimbursement in respect of the property or service and therewith provides written indication that a portion of the amount is on account of tax,

the following rules apply:

• (c) the registrant may claim an input tax credit, for the reporting period of the registrant in which the reimbursement is paid, equal to the amount (referred to in this section as the “tax reimbursed”) determined by the formula

  A × B/C

  where

  A

  is the tax payable by the beneficiary,

  B

  is the amount of the reimbursement, and

  C

  is the cost to the beneficiary of the property or service, and

• (d) where the beneficiary is a registrant who was entitled to claim an input tax credit, or a rebate under Division VI, in respect of the property or service, the beneficiary is deemed, for the purposes of this Part, to have made a taxable supply and to have collected, at the time the reimbursement is paid, tax in respect of the supply equal to the amount determined by the formula

  A × B/C

  where

  A

  is the tax reimbursed,

  B

  is the total of the input tax credits and rebates under Division VI that the beneficiary was entitled to claim in respect of the property or service, and

  C

  is the tax payable by the beneficiary in respect of the supply to, or importation by, the beneficiary of the property or service.

Used Returnable Containers

Marginal note:Acquisition of used returnable containers

• 176 (1) Subject to this Division, if

  • (a) a registrant is the recipient of a supply made in Canada by way of sale of used tangible personal property (other than a returnable container as defined in subsection 226(1)) that is a usual covering or container of a class of coverings or containers in which property (other than property the supply of which is a zero-rated supply) is delivered,

  • (b) tax is not payable by the registrant in respect of the supply,

  • (c) the property is acquired for the purpose of consumption, use or supply in the course of commercial activities of the registrant, and

  • (d) the registrant pays consideration for the supply that is not less than the total of

    • (i) the consideration that the registrant charges for supplies by the registrant of used coverings or containers of that class, and

    • (ii) all tax calculated on that consideration,

    for the purposes of this Part, the registrant is deemed (except where section 167 applies to the supply) to have paid, at the time any amount is paid as consideration for the supply, tax in respect of the supply equal to the amount determined by the formula

    (A/B) × C

    where

    A

    is

    • (a) if the supply is made in a participating province, the total of the rate set out in subsection 165(1) and the tax rate for that province, and

    • (b) in any other case, the rate set out in subsection 165(1),

    B

    is the total of 100% and the percentage determined for A, and

    C

    is the amount paid as consideration for the supply.

• Marginal note:Consideration exceeding fair market value

  (2) For the purposes of subsection (1), where a person makes a supply of used tangible personal property to a registrant with whom the person is not dealing at arm’s length for consideration that exceeds the fair market value of the property at the time ownership of the property is transferred to the registrant, the value of the consideration for the supply shall be deemed to be equal to the fair market value of the property at that time.

• (3) to (7) [Repealed, 1997, c. 10, s. 25]