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HOW TO SET UP THE GST/HST PUBLIC SERVICE BODIES’ (PSB) REBATE IN QBO

DEC 2018. THESE INSTRUCTIONS ARE NO LONGER WORKING DUE TO THE CHANGES IN THE SALES TAX CENTRE. I WILL UPDATE THE INSTRUCTIONS AS SOON AS POSSIBLE. 

“If your charity is a GST/HST registrant, you have to use a special net tax calculation for charities. When you use this calculation, you generally remit 60% of the GST/HST you charge and claim ITCs only on certain items, where all the conditions for claiming ITCs are met. In addition, you can claim the PSB rebate of the GST/HST paid or payable on your eligible purchases and expenses and for which you cannot claim ITCs, whether the GST/HST relates to your commercial activities or exempt activities.”

Source: https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/rc4082-gst-hst-information-charities/gst-hst-information-charities.html#P283_24869

What does this mean? When you charge and collect tax on sales, you will remit 60% and keep 40% of the amount collected. And although you will only be claim ITCs on certain items (know the rules), you will be eligible for the PSB rebate, meaning you will receive a rebate for 50% of the GST or federal part of the HST paid on purchases.

See my other blog post HOW TO SET UP TAX RATES FOR A CHARITY IN QBO TO SPLIT THE GST/HST ON SALES 60/40% here.

Here’s how to set this up in QBO. We’re going to add two new tax rates, then a new tax group.

NEW! You can now post the non-deductible portion back to the original expense account. This is the method I am outlining below. The non-deductible portion previously posted to a GST/HST Expense account that was automatically created by QBO (old method).

NOTE! For non-profit set ups already in place using the old method, you cannot change the existing set up. You will have to start from scratch with the steps below. If starting mid-year, you can go back and re-code individual transactions with the new sales tax code. Consider when you want to implement.

We’re going to add two new tax rates, then a new tax group. We’re not going to touch any of the existing rates. We may need them for other qualifying purchases (know the rules). I’m in a GST only province, so I’m going to set this up with the 5% GST in mind. You can modify this to work in different provinces by adjusting the percentages.

STEP ONE: ADD NEW TAX RATE

  • Click on Taxes from the left navigation bar
  • Click on Add tax in the upper right-hand corner

 Add tax from sales tax centre

  • Choose Tax rate

Add Tax Rate Expanded

  • Fill out as shown

GST ITC 50

  • Click Save

 

STEP TWO: ADD NEW TAX RATE

  • Click on Add tax in the upper right-hand corner

Add tax from sales tax centre

  •  Choose Tax rate

 Add Tax Rate Expanded

  • Fill out as shown. Note the Non-tracking – this is how you’re mapping back to the original expense account.

GST ITC 50 Non taxable non tracking

  • Click Save

 

STEP THREE: ADD GROUP RATE

  • Click on Add tax in the upper right-hand corner. 

Add tax from sales tax centre

 

  • Choose Group rate

Add group rate

  • Fill out as shown. You’re creating a group called NFP Purchases (or similar) that includes the two tax rates you created in steps one and two. NOTE: BE CAREFUL ADDING THE GROUP RATE. IT CANNOT BE EDITED.

Purchases Group Rate

  • Click Save

 

REVIEW YOUR WORK

 SS1

New rates and group

TIP: You can inactivate (by toggling Off) the two tax rates you just added so that only the group rate appears for selection on transactions.

NOTES:

I always test these out first in the test drive file. Here’s the link: https://qbo.intuit.com/redir/testdrive_ca

Apply same principals for setting up rates in different provinces.

Use names and descriptions for the tax rates and group rate that make sense to you. Just remember that the group rate cannot be edited.

Here’s a link to setting up rates in Ontario, for desktop: http://intuitglobal.intuit.com/iq/quickbooks/docs/HST_Charity_xONx.pdf

Rules around charities can be complicated. Please check the CRA website for more information.

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2 thoughts on “HOW TO SET UP THE GST/HST PUBLIC SERVICE BODIES’ (PSB) REBATE IN QBO

  1. Katrina Natale on said:

    Thank you soooooo much for this! I had no idea how I was going to track our 2.5% rebate for GST, but I was able to implement this method easily. Thanks!

  2. My pleasure! Glad to hear it worked for you.

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