WHAT ARE INPUT TAX REFUNDS (ITRs) FOR QST?

If you operate a business in Quebec, you have probably heard the term ITR — Input Tax Refund. ITRs allow you to recover the QST you pay on eligible business expenses, similar to GST ITCs (Input Tax Credits). However, because QST is governed by separate provincial legislation, its rules are not identical to GST’s. Many businesses misunderstand how ITRs work, when they can be claimed, and what documentation is required. This guide explains ITRs clearly so you can maximize your refunds and avoid denied claims or Revenue Québec verification issues.

Understanding ITRs ensures you never pay more QST than required and keeps your business audit ready.

LEGAL AND REGULATORY FRAMEWORK

ITRs are governed by the Quebec Taxation Act, which defines:

• which expenses qualify for ITRs
• how QST must be documented
• how to claim ITRs
• which supplies are eligible or ineligible
• limitations for large businesses
• deadlines for claiming refunds

The ITR system operates alongside GST ITCs, but with distinct rules and definitions.

KEY COURT DECISIONS

Courts have repeatedly confirmed that:

• ITRs require complete documentation — invoices must include QST registration numbers
• missing or illegible receipts invalidate ITRs
• expenses related to exempt supplies do not qualify for refunds
• incorrect classification of expenses justifies denial
• taxpayers must prove entitlement to ITRs — not the tax authority
• inconsistent bookkeeping is grounds for ITR review or reassessment

Courts emphasize that ITRs are not automatic; they must be supported by evidence.

WHAT ARE INPUT TAX REFUNDS (ITRs)?

An Input Tax Refund (ITR) is the refund of QST paid on eligible business expenses.

Example:
You purchase office equipment for $1,000 + QST.
You can claim the QST portion (9.975%) as an ITR on your QST return.

ITRs are the QST equivalent of Input Tax Credits (ITCs) for GST.

Both appear in the FPZ-500-V combined return.

WHICH EXPENSES QUALIFY FOR ITRS?

To qualify for an ITR, an expense must:

• be used in the course of commercial activity
• be supported by a valid invoice
• include the supplier’s QST registration number
• clearly show the amount of QST paid
• have a legitimate business purpose
• not relate to exempt supplies

Common eligible expenses:

• office supplies
• professional services
• software subscriptions
• telecommunications
• rent (if QST applies)
• utilities
• subcontractor services
• repair and maintenance
• business development expenses
• equipment and tools
• advertising and marketing
• travel and transportation (business portion only)

EXPENSES PARTIALLY ELIGIBLE FOR ITRS

These require allocation:

• vehicle expenses (business portion only)
• home office expenses
• internet and phone plans
• meals and entertainment (often 50%)
• mixed-use supplies

Proper allocation is essential to avoid overclaiming.

EXPENSES NOT ELIGIBLE FOR ITRS

You cannot claim ITRs on:

• personal expenses
• expenses related to exempt supplies
• insurance premiums
• interest and penalties
• club dues and memberships
• purchases where QST was not charged
• expenses paid to suppliers not registered for QST
• certain large business restricted items (in specific sectors)

DOCUMENTATION REQUIRED FOR ITRS

Invoices must include:

• supplier name and address
• supplier’s QST registration number
• invoice number
• invoice date
• detailed description of goods/services
• QST shown separately
• total amount paid

Bank statements alone are not enough.

HOW TO CLAIM ITRS IN YOUR GST/QST RETURN

ITRs are reported on the QST section of the FPZ-500-V combined return:

• list all eligible QST paid
• subtract ineligible amounts
• enter totals in the ITR section
• keep documentation for six years
• ensure amounts align with your bookkeeping system

COMMON MISTAKES THAT LEAD TO DENIED ITRS

• missing supplier QST numbers
• claiming personal expenses
• claiming QST on exempt activities
• forgetting digital invoices
• claiming expenses paid outside the period
• double-counting recurring payments
• POS coding errors
• using estimates instead of invoices

These mistakes often lead to refund verification.

SPECIAL RULES FOR LARGE BUSINESSES (LBITR RULES)

Certain large businesses face temporary restrictions on claiming ITRs for:

• road vehicles under 3,000 kg
• fuel
• telecommunications services
• electricity
• meals and entertainment

These restrictions are being phased out but still apply in some sectors.

If you are unsure whether LBITR rules apply, consult a CPA.

MACKISEN STRATEGY

Mackisen CPA helps businesses maximize ITRs by:

• reviewing supplier invoices
• allocating mixed-use expenses correctly
• reconciling QST paid with accounting records
• preparing documentation for verification
• correcting denied ITRs
• optimizing GST/QST processes for refunds

We ensure your claims are complete, accurate, and audit ready.

REAL CLIENT EXPERIENCE

A construction business had thousands in denied ITRs due to missing supplier tax numbers. Mackisen rebuilt documentation and secured approval.

A tech startup forgot to download invoices for software subscriptions. Mackisen created a digital archive and recovered ITRs.

A consultant misclassified exempt vs. taxable activities. Mackisen corrected filings and improved their refund cycle.

COMMON QUESTIONS

Are ITRs the same as ITCs?
No. ITCs refer to GST; ITRs refer to QST.

Can I claim ITRs without receipts?
No. Proper invoices are required.

Do ITRs apply to exempt activities?
No. Only taxable and zero-rated activities qualify.

Can I correct denied ITRs?
Yes, by providing proper documentation or filing an adjustment.

WHY MACKISEN

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps businesses understand, document, and claim ITRs properly. Our expertise prevents denied credits, accelerates refunds, and ensures compliance with QST rules.