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GST case on pension expenses decided in favour of the employer

Canadian Indirect Tax News, February 2008 (08-2)

The Tax Court of Canada (TCC) released its decision on February 22, 2008, in General Motors of Canada Ltd. v. The Queen 1, holding that General Motors (GM), as employer/sponsor of its defined benefit employee pension plans, was entitled to claim input tax credits on investment management expenses.

The TCC rejected the Canadian Revenue Agency's (CRA) argument that GM was not acting in the course of its commercial activities when acting as administrator of the plans. The Court also rejected, however, GM's alternative argument that discretionary investment manager services are GST-exempt "financial services."

It is too early to determine whether CRA will appeal the decision and/or whether Finance will now introduce the proposed legislative amendment that it announced in January 2007 that would overrule the position that GM has successfully argued and that would instead reduce any GST recovery to a 33% rebate claimable by the pension plan trust.

12008 TCC 117.

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