Reimbursement and Disbursement
For the purpose of GST, the term "reimbursement" refers to the recovery of an expense that you incur as a principal from another party. A reimbursement may be subject to GST if it is consideration for a supply of goods or services.
On the other hand, the recovery of a payment made on behalf of another party by you as an agent is termed as a "disbursement". A disbursement does not constitute a supply and hence, is not subject to GST.
GST Treatment of Recovery of Expenses
The following table shows the GST treatment when you recover expenses from another party, including whether you can claim the input tax incurred:
|If you have incurred the expenses as a principal||If you have incurred the expenses as an agent|
The recovery of expenses is
The recovery of expenses amounts to a supply unless the recovery is compensatory in nature and no goods or services are provided in return to the paying party. If the recovery of expenses amounts to a supply, it is subject to GST unless it qualifies as an exempt supply.
The recovery of expenses does not constitute a supply and is not subject to GST.
Input tax claim
You are entitled to claim input tax incurred on goods or services procured if the recovery of these expenses constitutes a taxable supply.
You are not entitled to any input tax claim since the goods or services are not supplied to you but to your principal.
Please refer to the e-Tax Guide "GST: Guide on Reimbursement and Disbursement of Expenses" (PDF, 585KB) for more information on:
- How to establish if you are acting as principal or agent in procuring goods or services
- Examples illustrating the correct GST treatment to apply for the reimbursement and disbursement of expenses
Common errors on output tax
Learn about whether you need to charge GST when you recover expenses from another party by watching this video! You may click here for more videos on commonly made output tax errors.