GST/HST on reimbursed expenses Canada is a common source of invoice mistakes for freelancers and sole proprietors. You buy a train ticket, pay for client-approved software, or book a hotel for a project, then bill the client back. Do you add GST/HST to that reimbursement, or just pass through the receipt amount?
The practical answer is: if the expense was part of your taxable service and you were not acting as the client's agent, the reimbursement is usually treated as extra payment for your service. That means GST/HST applies the same way it applies to your normal fee.
GST/HST on reimbursed expenses Canada: the basic rule
The CRA's out-of-pocket expense guidance says that when a supplier pays an expense while providing a service, and the expense is not incurred as an agent for the client, the amount billed back to the client is additional consideration for the supplier's service. In plain English: it becomes part of what the client pays you for the taxable work.
Example: you are an Ontario marketing consultant registered for HST. You charge a client $2,000 for a taxable project and also bill $300 for travel you paid personally. If the travel was your cost of delivering the consulting service, the invoice would generally show $2,300 plus 13% HST, not $2,000 plus HST and a tax-free $300 reimbursement.
Why the original receipt tax is not the deciding factor
Do not base your invoice only on whether you paid GST/HST on the original receipt. The reimbursement follows the tax treatment of your supply to the client. If your consulting service is taxable at 13% HST, the reimbursed travel, mileage, printing, courier, or software cost is often taxable at the same rate when you bill it back.
If you are registered, you may be able to claim an input tax credit for GST/HST you paid on the original business expense, assuming the expense is used in your commercial activity and you have proper receipts. Then you charge GST/HST to the client on the full taxable amount you invoice. For more on that recovery side, read the guide to GST/HST input tax credits.
When a true disbursement may be different
Some costs are genuine disbursements made as the client's agent. In that case, the client is treated as the person who received the third party supply, and your reimbursement may not be consideration for your own supply. This is more common where the contract clearly authorizes you to act on the client's behalf, the third-party invoice is really the client's cost, and you do not mark it up or use it as an input to your own service.
For many freelancers, most reimbursed costs are not true agency disbursements. A hotel room you used, an Adobe subscription in your name, a stock photo license you bought for your workflow, or delivery costs you control are usually your business inputs. If the distinction matters on a large invoice, ask an accountant before treating it as a tax-free pass-through.
How to show reimbursed expenses on an invoice
Keep the invoice clear. You can list expenses separately for transparency, but still apply GST/HST correctly. For example:
- Strategy project fee: $2,000
- Approved travel and printing expenses: $300
- Subtotal taxable services and expenses: $2,300
- HST at 13%: $299
- Total: $2,599
If you need a refresher on invoice requirements, including when to show your GST/HST number, see our guide to invoicing with HST as a Canadian freelancer.
Do reimbursed expenses count toward the $30,000 threshold?
If the reimbursement is additional consideration for taxable supplies, it should generally be included in the taxable revenue you track for the small supplier threshold. That can matter if client expenses are large: travel-heavy consultants, photographers, event contractors, and tradespeople can cross the threshold faster than they expect.
Track gross taxable invoices, not only your profit after expenses. The threshold is based on taxable supplies, not net income. If you are unsure how the rolling window works, start with how the $30,000 GST/HST threshold works. You can also use HST Hero to track taxable revenue and reimbursed amounts before registration sneaks up.
Records to keep
Save the original receipts, the client approval for the expense, and the invoice where you billed it back. If you claimed an input tax credit, keep the receipt showing the supplier's GST/HST number and the tax paid. If you treated something as a non-taxable agency disbursement, keep the contract or email that shows you were authorized to act for the client and that the third-party cost belonged to the client.
Quick checklist
- If the expense supports your taxable service, expect GST/HST to apply when you bill it back.
- Claim eligible input tax credits on GST/HST you paid, if you are registered and have receipts.
- Only treat a cost as an agency disbursement when the facts and contract support it.
- Show reimbursed expenses clearly on the invoice so the tax calculation is easy to follow.
- Include taxable reimbursements in your rolling threshold tracking.