Bad Debts

If you write off an amount as a bad debt, the GST and QST already remitted on the amount can be recovered through an adjustment on your GST return (box 108) or QST return (box 208). The adjustment must be made on a return filed within four years after the deadline for filing the return for the reporting period in which the bad debt was written off.

Under the GST and QST systems, certain requirements must be met for a debt to be deemed a bad debt. For example, efforts must have been made to recover the debt and the debt must be written off the books of account. You must also keep on file the supporting documents respecting the bad debt.

Example

You provide a service to a customer and bill him for a total amount of $149.46
($129.99 + $6.50 GST + $12.97 QST).
You remit the full amount of the taxes to Revenu Québec, but the purchaser pays you only $30.

You write off the rest of the amount as a bad debt. In this case you may make GST and QST adjustments on your returns, calculated as follows:

GST adjustment

$ 6.50 × $ 149.46 - $ 30 $ 149.46 = $ 5.20

QST adjustment

$ 12.97 × $ 149.46 - $ 30 $ 149.46 = $ 10,37

A month later, you receive a payment of $60 on the $119.46 that you wrote off as a bad debt. You must therefore calculate and remit the GST and QST applicable to the $60 payment.

GST remittance:
$ 60 × $ 6.50 $ 149.46 = $ 2.61
QST remittance:
$ 60 × $ 12.97 $ 149.46 = $ 5.21

For more information, refer to interpretation bulletin TVQ. 444-1, Bad Debts, on the Publications du Québec website.

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