Quebec TPQ vs federal CRA allowance: how to reconcile in 2026
Quebec has its own tax regime. How to reconcile provincial TPQ with the federal CRA allowance for mileage.
The Quebec singularity
Unlike other Canadian provinces, Quebec runs a parallel tax administration through Revenu Québec, with its own Income Tax Act (Loi sur les impôts du Québec) and its own sales tax (TPQ — Taxe de vente du Québec). For mileage reimbursement, this means employers in Quebec face two layers:
1. **Federal** (CRA): the standard mileage allowance rules, the deemed Input Tax Credit on GST (post 114), the T2200/T777 forms. 2. **Provincial** (Revenu Québec): the Quebec mileage allowance rules, the deemed input tax refund on TPQ, the TP-64.3 form (Quebec equivalent of T2200).
Most rules align by design, but a few diverge — and the divergences cost money when missed.
The reasonable allowance: same number, different test
The CRA's reasonable allowance per Income Tax Regulation 7306 is CAD 0.72/km for the first 5,000 km and CAD 0.66 thereafter (2025; 2026 update annually).
Revenu Québec's reasonable allowance per the *Règlement sur les impôts* aligns with the federal number — but the test for *reasonableness* under §41.1 of the Quebec Income Tax Act is slightly broader, taking into account the actual driving conditions in the province (winter tires required, longer winter season, gravel rural roads). In practice, an allowance up to ~10% above the federal rate has been accepted by Revenu Québec in case law, where the federal CRA would treat it as taxable wages.
The practical upshot: Quebec employers have a slightly larger window for legitimately higher reimbursement than employers elsewhere in Canada.
TPQ deemed input tax refund (the bonus most employers miss)
Under Article 211 of the *Loi sur la taxe de vente du Québec*, employers paying a reasonable mileage allowance can claim a deemed input tax refund (ITR) of TPQ at the rate of 9.975/109.975 of the allowance. This stacks with the federal GST ITC of 5/105 (post 114) for a combined recovery of approximately 13.5% of the allowance.
Example: a Quebec employer pays a CAD 1,080 monthly allowance to a rep (1,500 km × 0.72).
- Federal GST ITC: 1,080 × 5/105 = CAD 51.43. - Provincial TPQ ITR: 1,080 × 9.975/109.975 = CAD 97.96. - Combined recovery: CAD 149.39/month, or ~CAD 1,793/year per driver.
For a 30-driver Quebec fleet, that's CAD 53,790/year — most of which is recoverable for 4 years backward via the GST/QST general rebate route.
TP-64.3 vs T2200
When the employee deducts mileage on their return (rather than receiving an allowance), the federal form is T2200 *Declaration of Conditions of Employment*. The Quebec equivalent is the TP-64.3 *Conditions générales d'emploi*. The two have similar content but each must be filed with the respective tax administration; one does not satisfy the other.
The employee files the federal T2200 with their federal return (T1) and the TP-64.3 with their provincial return (TP-1). Most employers only know to issue the T2200 and miss the TP-64.3 — leaving the Quebec employee unable to claim the provincial deduction.
Worked example: an employer in Montreal
A Montreal employer with 25 reps:
- Federal allowance per CRA: CAD 0.72/km, paid monthly per logbook. - Quebec acceptance: same rate, no addition needed (within the federal range). - T2200 issued at year-end for any rep choosing actual-cost deduction (rare). - TP-64.3 issued in parallel — same trigger. - GST/HST ITC claimed at 5/105 of the allowance, recorded in the Quebec QBO file. - TPQ ITR claimed at 9.975/109.975 of the allowance, in the same file. - Annual recovery: ~CAD 44,800 in combined GST + TPQ refunds.
Without the TPQ ITR claim, the same employer would recover only CAD 15,400 — leaving CAD 29,400/year on the table.
Common mistakes
1. **Missing the TPQ ITR**: by far the most common. Most accounting systems track GST but not the parallel TPQ refund mechanism on allowances. 2. **Missing the TP-64.3**: employees can't claim the Quebec deduction without it; the employer's failure to issue is the proximate cause. 3. **Different rates federal/provincial**: don't pay one rate at the federal level and another at the provincial. The reimbursement is one number; both administrations look at the same number. 4. **TPQ ITR on a non-Quebec employee**: the ITR is available only when the employee performs the work primarily in Quebec. A traveling rep with most kilometers in Ontario falls under federal-only. 5. **Missed back-claim window**: the general rebate (Form GST189 federally; FP-189 in Quebec) has a 4-year limit. Many employers discover the missed ITR after the window closes for the early periods.
Year-end coordination
- Reconcile total mileage allowances paid in Quebec. - Multiply by 5/105 → federal GST ITC due. - Multiply by 9.975/109.975 → Quebec TPQ ITR due. - Compare to what was claimed in periodic returns; file rebate forms for any miss. - Issue TP-64.3 in parallel with T2200. - Confirm employee has both forms in time for the April 30 federal/provincial filing deadline.
Bottom line
Quebec's parallel tax regime offers a meaningful TPQ refund on mileage allowances that most accounting systems silently miss. For a 25-30 driver fleet, the recovery typically pays for the cost of the mileage tracking system itself within the first quarter. Employers who pay only the federal-equivalent rate and forget the provincial mechanics are leaving five-figure recoveries on the table every year.