To use the simplified method to calculate the input tax credits (ITCs) and the input tax refunds (ITRs) for your small business or eligible public service body (PSB), follow the steps below.

Step 1

Determine the total amount of your taxable purchases on which you paid the GST and QST for the period covered by the return. The total amount must include the GST and QST you paid, and any amount on which you should have paid the taxes.

This amount must also include, where applicable:

• import taxes or duties
• tips paid, provided they are reasonable
• expenses incurred for capital property that is personal property (such as office furniture and equipment) that you used more than 50% of the time for your commercial activities, as well as expenses related to improvements made to such property
• reimbursements for expenses incurred by employees, partners or volunteers in connection with taxable supplies
• the portion of the cost of property or a service that became payable after the effective date of the election to use the simplified method
• interest and penalties relating to a late payment for property or a service whose sale is taxable
• for purposes of calculating an ITC, the payment of non-refundable provincial sales taxes

However, do not include the following amounts:

• expenses on which you did not pay GST or QST (such as payment of salaries or wages, insurance premiums or interest)
• amounts paid for the exempt or zero-rated purchase of property or services
• imports that are not subject to GST/HST under the GST/HST system, and property brought into Québec that is not subject to QST under the QST system
• passenger vehicles and aircraft used less than 90% of the time by individuals or partnerships in their commercial activities
• amounts that were paid or became payable before you began using the simplified method
• 50% of meal and entertainment expenses (this does not apply to charities and public institutions)
• the portion of the capital cost of a passenger vehicle that exceeds the maximum amount that can be deducted for income tax purposes
• purchases made to make exempt supplies of property or services
• property or services purchased for personal use
• purchases from suppliers who are not registrants
• under the GST/HST system, payments of refundable provincial sales taxes, such as the QST
• if you are a truck driver, meal expenses for which you cannot claim an ITC or an ITR
• payments made in connection with the rental or purchase of real property

Step 2

First, determine your total taxable purchases (excluding zero-rated purchases) for which you can claim an ITR under the QST system. Multiply this amount by 9.975/109.975. The result is your ITR for the period.

Next, determine your total taxable purchases (excluding zero-rated purchases) for which you can claim an ITC under the GST system. Subtract the ITR to which you are entitled, and multiply the amount by 5/105. The result is your ITC for the period.

The simplified method can be used only for property and services acquired to make taxable sales. Property that is used to make both taxable and exempt sales, or that is partly intended for personal use, gives entitlement to an ITC or ITR only for the portion acquired for use in the course of commercial activities.