Recent legislative changes and proposals affecting pension entities
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Canadian Indirect Tax News, October 13, 2010
The Canada Revenue Agency (CRA) has just released a draft document, for discussion purposes, regarding recently enacted changes to rules governing the application of the GST/HST to pension entities and, more specifically, the new rebate for such entities.
Please note that the deadline for submission of comments or suggestions to the CRA is November 30, 2010.
Highlights of the recent legislative changes and proposals include:
- New provisions in the Excise Tax Act to ensure that pension-related expenses incurred by an employer, or employer resources consumed in respect of pension activities, are the subject of a deemed taxable supply by the employer to the pension entity. Under these rules, an employer incurring such expenses could claim an input tax credit in respect of GST/HST paid; however, it would also have an obligation to remit the tax deemed to have been paid by the pension entity on the deemed supply. The pension entity may be eligible to claim a rebate for a portion of the tax paid or deemed to have been paid, and may elect to transfer the rebate to the employer under certain conditions. The new rules apply to fiscal years of an employer, and to claims periods of a pension entity, beginning on or after September 23, 2009. For additional background, please refer to Deloitte’s April 2010 edition of Canadian Indirect Tax News.
- Pension entities may be (or may elect to be) a Selected Listed Financial Institution (SLFI) and thus be subject to the Special Attribution Method (SAM) formula for calculating the actual HST liability of the plan based on the residency of plan members. Generally, where a plan has beneficiaries in an HST province and in any other province, it will be an SLFI unless it qualifies as a “small investment plan”. While the draft CRA document noted above does not provide detailed information on the requirements for SLFIs under the Selected Listed Financial Institutions Attribution Method (GST/HST) Regulations, it does provide some preliminary information about these requirements as they relate to the deemed supply rules, and the document also states that another GST/HST notice will be released to further explain the SLFI rules.
These changes will have a significant impact on pension-related transactions. Although the CRA’s discussion document is helpful, the rules remain complex and challenging for companies to apply.
Since the release of the legislation, Deloitte’s indirect tax experts have been developing practical tools and approaches to assist clients with varied pension arrangements in applying the new GST/HST pension regime to their businesses. If you have any questions concerning this bulletin, contact the Indirect Tax department of your local Deloitte office.
This publication is produced by Deloitte & Touche LLP as an information service to clients and friends of the firm, and is not intended to substitute for competent professional advice. No action should be initiated without consulting your professional advisors. Your use of this document is at your own risk.