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GST/HST & Agent Disbursements: Canadian Tax Lawyer’s Guide

Determining the GST/HST payable for the disbursement itself can be simple, but the GST/HST obligations for a client reimbursing a business will invite many additional questions including the nature of the disbursement and the relationship between the business and the client. Whether the cost of that expense will pass through to a client, or whether that expense will become a taxable supply (that is, a purchase that the client will be required to pay additional GST/HST on) can become a very complicated tax analysis. This article will discuss the general GST/HST tax rules for pass-through transactions between businesses and clients, and the role that agency plays in determining what tax obligations the business and client face for an expense on behalf of a client. If your business often incurs expenses on behalf of clients and receives reimbursements for those expenses, and especially so if you incur costs in multiple jurisdictions, then it is imperative you speak with an expert Canadian tax lawyer to ensure that you collect and remit GST/HST appropriately on your expenses and avoid exposure to possible tax penalties.



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