COUNTRY FACTSHEET
Expense Compliance in Canada
Country Demographics
Sales Tax Rate
There are multiple indirect sales taxes in Canada that replace VAT:
- Federal Goods and Services Tax (GST): This applies to the supply of most goods and services in Canada.
- Harmonised Sales Tax (HST): Harmonised sales tax is the combination of federal and provincial tax into one sales tax. This tax is in effect in: New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, and Prince Edwards Island.
- Provincial Sales Tax (PST): This tax is levied in addition to GST by British Columbia, Saskatchewan and Manitoba.
- Québec Sales Tax (QST): QST is provincial tax specifically for Québec and levied in addition to the GST.
| Province | Type | Rate | PST rate | Federal GST |
| Alberta | GST | 5% | 0% | 5% |
| British Columbia | GST + PST | 12% | 7% | 5% |
| Manitoba | GST + PST | 12% | 7% | 5% |
| New Brunswick | HST | 15% | 10% | 5% |
| Newfoundland | HST | 15% | 10% | 5% |
| Northwest Territories | GST | 5% | 0% | 5% |
| Nova Scotia | HST | 15% | 10% | 5% |
| Ontario | HST | 13% | 8% | 5% |
| Prince Edward Island | HST | 15% | 10% | 5% |
| Québec | GST + QST | 14.975% | 9.975% | 5% |
| Saskatchewan | GST + PST | 11% | 6% | 5% |
| Yukon | GST | 5% | 0% | 5% |
Benefits and Allowances
An employer can give employees benefits, allowances or reimbursements for expenses. In general, these are considered taxable income. However, there are exceptions where benefits or allowances can be excluded from the employee’s taxable income. You can find more information in the complete Employer’s Guide on Taxable Benefits and Allowances.
Lodging
Providing free or subsidised lodging is considered a taxable benefit. An employer has to add to the employee’s income to the fair market value of the board and lodging the employer provides; if subsidised, you have to add to the employee’s salary to the fair market value of the board and lodging you provide, minus any amount the employee paid.
Certain situations can change the value of the taxable benefit your employee gets if you provide free or subsidised board and lodging, like:
- If you provide lodging allowances to players on sports teams or members of recreation programs.
- If you provide board, lodging, or transportation, or allowances for board, lodging, or transportation to an employee who works at a special work site or a remote location.
Meals
Providing overtime meals or an allowance for overtime meals is not considered a taxable benefit if all the following requirements are met:
- The allowance, or the cost of the meal, must be reasonable. This is generally considered to be up to the value of $23 (including the GST/HST and PST). The CRA will consider higher amounts reasonable if the average cost of meals is higher in that location, or under other significant extenuating circumstances.
- The employee works two or more hours of overtime subsequently before or after their usual contracted hours of work.
- The overtime is infrequent or considered occasional. Typically, occasional would be less than three times a week.
Subsidised meals
If you provide subsidised meals to an employee (like in an employee dining room or cafeteria), these meals are not considered a taxable benefit if the employee pays a reasonable price. ’Reasonable’ is classified as a price that covers the cost of the food, preparation, and service.
If the charge is not reasonable, the value of the benefit is the cost of the meals, minus any payment the employee makes.
Record Keeping
The Income Tax Act states that companies must keep business records for a minimum of six years (from end of last tax year). This includes receipts and invoices.
The Canada Revenue Agency (CRA) requires all records to be kept at the person’s place of business or residence in Canada. These records must be made available to CRA officers upon request at all reasonable times.
If records are kept outside of Canada and accessed electronically, a copy of these records may be accepted as long as they:
- Are available in Canada in an electronically accessible format that is readable and useable,
- Contain any necessary details to accommodate tax returns filed with the CRA.
Digital Record Keeping
Digital records must remain complete, reliable, and usable for the entire retention period.
Files must be stored in formats that are electronically readable (e.g., CSV, TXT, XML, PDF). If you use proprietary or encrypted systems, you must be able to convert or extract records into a standard readable format upon request.
Systems must allow CRA to trace every transaction from its source to final reports (e.g., journal entries to financial statements).
You must maintain a full audit trail, including:
- Transaction histories,
- Adjustments or overrides,
- User access logs.
You must have backup systems in place to prevent data loss from system failure, accidental deletion, or security breaches.
Backups must:
- Preserve the full content of records,
- Be tested regularly for reliability,
- Retain version control and clear documentation of backup dates and file contents,
- Backup copies must also meet the CRA’s accessibility and retention standards.
All original source documents must be kept digitally (or in paper if applicable), including invoices, receipts, contracts, emails confirming transactions, and legible scanned copies that are unaltered.
Detailed documentation for any electronic system used to store or manage records must be maintained, including:
- System architecture and data flowcharts,
- Software and hardware versions,
- Change logs and update history,
- User access protocols and internal controls.
- CRA auditors may request these documents to understand how data is stored and retrieved.
CRA auditors must be granted timely access to your electronic records in a usable format.
If CRA requests a copy of your records:
- You must provide it in a format compatible with their audit tools.
- Failure to do so can lead to compliance actions or estimated assessments.
If you use a third party (e.g., payroll provider, cloud service) to store or manage records:
- You remain legally responsible for ensuring those records meet CRA requirements.
- You must ensure the provider can deliver data access and meet audit demands.
Mileage
A mileage allowance is any payment that employees receive from an employer for using a personal vehicle to travel for work (e.g. visiting a client, not commuting between home and work).
Mileage allowances are considered tax-free if the following conditions apply:
- The mileage rate per kilometre is reasonable (see below for the defined rates),
- The allowance is based only on the number of business kilometres driven in a year,
- You did not reimburse the employee for expenses related to the same use of the vehicle. This does not apply to situations where you reimburse an employee for toll or ferry charges or supplementary business insurance if you determined the allowance without including these reimbursements.
When your employees fill out their income tax and benefit return, they do not include this allowance in income.
Per-kilometre mileage rates
You can find the reasonable mileage rates on the CRA’s website.
| Year | First 5,000 kilometres (province) | Additional kilometres (province) | First 5,000 kilometres (territory) | Additional kilometres (territory) |
| 2025 | $0.72 | $0.66 | $0.76 | $0.70 |
| 2024 | $0.70 | $0.64 | $0.74 | $0.68 |