GST/HST/QST Rebate for Pension Entities: The new rules

GST/HST Notice 281 entitled “Subsection 172.1(4) Election for Specified Pension Entity”, dated January 2013, explains the information required in an election made under subsection 172.1(4).

GST/HST Notice 280 entitled “Subsection 172.1 Information Requirements”, dated January 2013, explains the information that must be provided to a pension entity by a participating employer that is deemed to have made a taxable supply under any of subsections 172.1(5), (6) or (7).

National assembly Bill 32, assented to December 9, 2011, provides QST harmonisation measures to the GST with respect to pension plan expenses.

GST/HST Technical Information Bulletin B-107, entitled “Investment Plans (including Segregated Funds of an Insurer) and the HST”, and dated October 2011, explains the rules for calculating the provincial part of the HST that apply to investment plans (including segregated funds of an insurer) following the introduction of the HST in Ontario and British Columbia. It also explains the special attribution method (SAM formula) which is used to calculate Selected listed financial institution’s (SLFI) liability for the provincial part of the HST.

GST HST Notice 265, entitled “GST/HST Registration for Listed Financial Institutions [LFI] (Including Selected Listed Financial Institutions [SLFI])”, dated May 2011, explains when a LFI, including SLFI, is required to be registered for the Goods and Services Tax (GST)/Harmonized Sales Tax (HST), and when LFI and SLFI may voluntarily register for GST/HST purposes.

GST/HST Notice 261, entitled “Information Required for Tax Adjustment Notes Issued by an Employer to a Pension Entity and the Consequential Notices Issued by the Pension Entity”, dated December 2010, explains the information to include in the tax adjustment note issued to a pension entity.

In 2010, the CRA did a major overhaul of the GST rules applicable to pension plan expenses. In essence, the exhaustive new provisions in the Excise Tax Act (introduced through the Jobs and Economic Growth Act 2010, c. 12, the Bill C-9), treat the GST/HST deemed paid relating to pension fund expenses to be eligible to a 33% rebate. Effective date for this change is for financial years beginning after September 22nd, 2009. These new enacted rules, currently described in the GST Notice 257, dated October 2010, have been released in a draft 53-page version.

Some GST/HST/QST Pension Plans Forms

Pension Plan Expenses – Interpretive and Administrative Positions of the CRA on the old rules

For employers’ fiscal years beginning before September 23rd, 2009, the CRA published a revised version of the Technical Information Bulletin-032 in August 2011. This revised version decribes in details the Agency’s stance as to how the GST/HST applies to transactions carried out in the course of the administration of a registered pension plan. This bulletin elaborates on the interpretive position of the Agency, which is the highlight of the new version of the B-032, and also the administrative position of the Agency.

GST/HST Pension plan – Opinion from the bench with respect to the old rules

In the General Motors of Canada Limited (GMCL) 2009 FCA 114 case, the Federal Court of Appeal granted the ITCs paid by GMCL relating to investment management services based on a three-prong test, as previously established by judge Campbell of the Tax Court of Canada. The test is as follow: (1) GMCL acquired the supply of investment financial services; (2) GST was payable or paid by GMCL; (3) this service was acquired in the course of GMCL’s commercial activities. As such, the court rejected the argument of the Agency that GMCL as an administrator of the pension plans was not engaged in commercial activities for pension expenses.