The Canada Revenue Agency has issued this notice to clarify the information that an employer must include when issuing a tax adjustment note (TAN) to a pension entity to reduce its net tax, pursuant to subsections 232.01 and 232.02 of the Excise Tax Act (ETA).
In circumstances where an employer is deemed to have made taxable supplies to a pension entity under subsections 172.1(5) or 172.1(6) of the ETA, but has also charged GST/HST on the same supply made to the pension entity, sections 232.01 or 232.02 allow the employer to reduce its net tax, by issuing a TAN to the pension entity. The issuance of a TAN will ensure the employer does not remit tax twice on a particular supply and also prevents a pension entity from realizing the benefit of a rebate or input tax credit twice on the same property or service.
Under sections 232.01(6) or 232.01(7) of the ETA, the employer is required to issue the TAN in prescribed form, containing prescribed information and in a manner satisfactory to the CRA. To date, the CRA has not issued a prescribed form. The notice describes the information that must be included by an employer issuing a TAN under subsection 232.01(3), or 232.02(2).
An explanation of the rules pertaining to the pension rebate is included in GST/HST Notice No. 257, “Draft GST/HST Technical Information Bulletin, The GST/HST Rebate for Pension Entities”. Please see example 14 of GST/HST Notice No. 257 for an illustration of the general purpose and function of a TAN issued under sections 232.01 and 232.02.
CRA GST/HST Notice No. 261