Understanding recoverable tax on business expenses
What an input tax credit is
A business registered for GST and QST does not bear the tax it pays on commercial purchases: it recovers it. Federally this is an input tax credit (ITC); in Quebec, an input tax refund (ITR). In practice, the tax paid on your expenses is offset against the tax you collected on sales, and you remit only the difference. If purchases exceed sales in a period, the difference is refunded to you.
Registration is the precondition
Without registration, no credit is possible and the tax paid stays a cost. Registration is mandatory once taxable sales exceed $30,000 over four consecutive calendar quarters, and voluntary below that. Many small businesses stay under the threshold without realising that voluntary registration would let them recover tax on purchases from day one.
The 50% rule on meals and entertainment
Meals and entertainment qualify for only half the credit, both federally and in Quebec. A $115 business meal including tax contains roughly $15 of tax, of which only $7.50 is recoverable. This limitation has no equivalent in France, where VAT on business meals is fully deductible.
The receipt is what proves the claim
A credit cannot be claimed from a bank statement: you need the invoice or receipt showing the tax amount and, above $30, the supplier's registration number. This is where most of the money is lost — not because the expense was ineligible, but because the document disappeared. The claim window is generally four years.
What this estimate does not cover
Some expenses follow their own rules: passenger vehicles are capped, recreational club dues are excluded, the personal share of mixed-use expenses must be removed, and fuel in France is only partially deductible depending on the vehicle. The figure shown here covers the two categories entered, at current rates; it does not replace a review of your own situation.