Application to a charity
Example 16 – Volunteer reimbursement
In a claim period, a volunteer of a charity rented a car in Ontario while attending two days of meetings as a representative of the charity. Since the volunteer was not returning home after the meetings, but was taking a three day vacation, the car rental agreement was for a five-day period. The volunteer paid $200 plus $26 in HST ($200 × 13%) for the car rental. The charity reimbursed the volunteer for the car rental, including the HST, in respect of the meetings. The percentage reimbursed was 40% (2/5 × 100%), which was the two days' use during the meetings of the five-day car rental.
Pursuant to section 175, the charity is deemed to have received a supply of the car rental, and the use of the car by the volunteer for the two days is considered to be use by the charity.
The tax the charity is deemed to have paid in respect of the supply is equal to
A × B
A is $26 – that is, the tax paid by the volunteer,
B is 40% which is the lesser of
- 40% – that is, the percentage of the cost to the volunteer that was reimbursed, and
- 40% – that is, the extent expressed as a percentage to which the rental of the car was acquired for use in relation to activities of the charity.
Therefore, the tax deemed paid by the charity for the car rental is equal to $10.40 ($26.00 × 40%). The federal part of the HST deemed paid is $4.00 ($10.40 × 5/13). This amount is included in subparagraph 259(1)(a)(iv) when calculating the federal non-creditable HST charged in respect of the supply for the claim period. The provincial part of the HST deemed paid is $6.40 ($10.40 × 8/13). This amount is included in subparagraph 259(1)(a)(iv) when calculating the provincial non-creditable HST charged in respect of the supply for the claim period.