This publication has been issued by the Canada Revenue Agency in draft form to invite comments from taxpayers. On January 26, 2007, the Department of Finance proposed a new pension entity rebate intended to ensure that GST/HST relief on pension plan expenses accrues to all pension entities. Previously under the Excise Tax Act, rebates had been available only to trusts governed by a multi-employer pension plan, other than a plan where 10% or more of the employer contributions were made by listed financial institutions. The new rules apply for fiscal years of employers, and to a pension entity’s rebate claim periods, beginning on or after September 23, 2009. The multi-employer pension plan rebate is still available for periods beginning before September 23, 2009.
The effect of the new rules will deem all of the GST/HST on pension-related expenses incurred by participating employers to have been paid by the relevant pension entity. In turn, the pension entity will be entitled to claim a 33% rebate of the GST/HST actually paid or deemed to have been paid under the new legislation. The rebate will be available regardless of whether or not the pension entity is registered for GST/HST. In addition, an election is available where a pension entity and all participating employers of the pension plan may jointly elect to transfer some or all of the rebate entitlement to some or all of the plan’s participating employers that are registered for GST/HST.
The new rules governing the pension entity rebate are contained in Bill C-9, the Jobs and Economic Growth Act, S.C. 2010, c. 12, which received Royal Assent on July 12, 2010. The bulletin also incorporates the draft Selected Financial Institution Attribution Method (GST/HST) Regulations, released on June 30, 2010, which explain how listed financial institutions, including pension plans, must account for the HST.
Clients should be aware that the Department of Finance, in discussions with Ryan, have confirmed that they are considering including the GST on the deemed supply to the pension plan under section 172.1 of the Excise Tax Act when calculating whether an investment plan (including a pension plan) exceeds the $10,000 threshold for the small investment plan exemption from the Selected Listed Financial Institution (SLFI) rules.
CRA Notice No. 257