The federal Department of Finance has released draft legislative and regulatory proposals dealing with the goods and services tax issues that apply to pension plans.
The proposals under consideration include amendments to:
- Revise the GST/HST rules applicable to pension plans to ensure they apply fairly and effectively to pension plans that use master trusts or master corporations.
- Improve the clarity and effectiveness of the GST/HST rules applicable to certain pension plans and financial institutions by introducing clarifications and technical improvements.
The federal government has also launched consultations on other issues that address provinces that don’t charge HST. Financial service providers are exempt from charging GST and HST and aren’t eligible to claim input tax credits for the amounts paid on their business expenses. If a provider makes a purchase in a province that charges HST, it pays the entire tax. If it makes the purchase in a non-HST province, it pays five per cent GST and would therefore have an incentive to buy supplies in such a jurisdiction in order to pay less tax.
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To avoid that, selected listed financial institution rules are in place for financial service providers that operate in at least one HST province. The rules determine the unrecoverable GST amount from HST that the providers pay.
Currently, the Excise Tax Act doesn’t consider investment entities structured as limited partnerships to be an investment, so the special rules don’t apply to them.
The Department of Finance proposes extending the special rules to investment limited partnerships “whose principal activity is the investing of funds on behalf of a group of investors through the acquisition and disposition of financial instruments.”
Those interested in the issue can send comments to fin.gsthst2016-tpstvh2016.fin@canada.ca by Nov. 30, 2016. The government is accepting comments on the proposals involving pension plans that user master trusts and master corporations until Aug. 31, 2016.
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