The GST treatment for the recovery of expenses from another party such as your employees, customers, related corporations or suppliers, depends on whether the expenses are incurred by you as a principal or as an agent.

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 principalIf you have incurred the expenses as an agent

The recovery of expenses is

a reimbursement

a disbursement

GST treatment

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