The Canada Revenue Agency has revised this bulletin which outlines its administrative position regarding how the GST/HST applies to transactions carried out in the course of the administration of a registered pension plan. Details of the CRA's administrative position, which was originally published on June 8, 1993, are provided in this bulletin under the heading, "Administrative position".
As a result of recent jurisprudence, where the parties to a particular pension plan did not follow the administrative position consistently, the CRA may apply the normal rules applicable to the claiming of input tax credits as set out in section 169 of the Excise Tax Act (“ETA”). This is the CRA’s interpretive position, which is outlined under the heading "Interpretive position".
Both the administrative position and the interpretive position provided in this bulletin apply to registered pension plans of a single employer until the new rules contained in Bill C-9, the Jobs and Economic Growth Act, S.C. 2010, c. 12, which passed into law on July 12, 2010, came into effect. These new rules apply for claim periods beginning on or after September 23, 2009.
Interpretative position
For periods beginning before September 23, 2009 (i.e., the employer’s fiscal years beginning before September 23, 2009), in addition to the administrative position provided in this bulletin, the CRA may apply the interpretive position outlined below, where the administrative position has not been followed on a consistent basis by the parties to the pension plan or where the pension plan is not a single employer pension plan. For purposes of claiming input tax credits, an expense related to a pension plan may be incurred by an employer (i.e., the person liable to pay the consideration under the agreement for the supply). The employer would be entitled to claim an input tax credit, provided that all of the conditions of section 169 of the ETA are met.
Where pension related expenses incurred by the employer have been paid for out of trust assets because of the following situations, the CRA generally considers the payment made by the plan trust to be consideration for a supply of property or services made by the employer to the plan trust:
- the plan trust paid the third party supplier directly;
- the employer invoiced the plan trust for the costs of the inputs; and/or
- the plan trust reimbursed the employer.
In such circumstances, the employer would generally be considered to be making a supply of property or services to the plan trust. If the employer is a GST/HST registrant, it would be required to charge, collect and remit GST/HST on the supply to the plan trust where the supply is not exempt. However, the employer would be entitled to claim an input tax credit in respect of the property or service being acquired or imported for supply to the plan trust, provided that all of the conditions of section 169 of the ETA are met.
If the plan trust is a GST/HST registrant, it is entitled to claim input tax credits, where the property or service has been acquired or imported by the plan trust for use by the plan trust in the course of its commercial activities. Otherwise, the plan trust may not claim input tax credits.
Please see the bulletin for details on the administrative position.