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

GST/HST NOTICE 304 entitled “GST/HST Pension Plan Rules for Master Trusts” released on April 28, 2017 explains the new legislation for pension plan expenses relating to master trusts. In brief, these new rules are introduced to insure that the GST and the HST treatment is applied fairly for pension plans that use master trusts.

GST/HST TIB B-032 This third version of the GST-HST Technical Information Bulletin (TIB) B-032 dated November 2015 ( the two previous one were dated June 1993 and August 2011) entitled “Expenses Related to Pension Plans” provides high level guidelines on pension plan expenses.

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 April 2013, 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 22^nd, 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

 

• RC4607 E(17). GST/HST and QST Pension Entity Rebate Application and Election.
• RC4601 GST/HST Reporting Entity and Tax Adjustment Transfer Elections and Revocations for a Selected Listed Financial Institution.
• RC4602 Request for a Group GST/HST Registration Number for Selected Listed Financial Institutions with Consolidated Filing.
• RC4603 GST/HST Tax Adjustment Transfer Election and Revocation for a Selected Listed Financial Institution.
• RC4604 GST/HST Consolidated Filing Election for Selected Listed Financial Institution and Notice of Revocation.
• RC4604-1 Election for a Selected Listed Financial Institution to Join a GST/HST Consolidated Filing Election.
• RC4604-2 Election for a Selected Listed Financial Institution to Withdraw From a GST/HST Consolidated Filing Election.
• RC4605 Total Tax Recovery Rate Election and Revocation for a Selected Listed Financial Institution.
• RC4606 Election or Revocation for a Qualifying Small Investment Plan to be Treated as a Selected Listed Financial Institution.
• RC4607 GST/HST Pension Entity Rebate Application and Election.
• GST494 Goods and Services Tax/Harmonized Sales Tax Final Return for Selected Listed Financial Institutions.

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

For employers’ fiscal years beginning before September 23^rd, 2009, the CRA published a revised version of the Technical Information Bulletin-032 in August 2011. This revised version describes 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.