The Canada Revenue Agency (CRA) recently issued GST/HST Technical Information Bulletin B-108, “Changes to GST/HST Rules for Pension Plans – New Section 157 and Amendments to Section 172.1”. This document discusses the changes to the GST/HST pension plan rules for employers, contained in Bill C-60, which received Royal Assent on June 26, 2013. The amendments to section 172.1 apply to fiscal years beginning after March 21, 2013, while new section 157 applies to supplies made after that date.
Definitions of the specific terminology used in this bulletin are available in GST/HST Notice 257, “The GST/HST Rebate for Pension Entities.”
Taxable supplies are deemed to be made by a registrant “participating employer” of a pension plan who either acquires, consumes or uses a property, service or “employee resource” (except for “excluded resources”) for supply to a pension entity who consumes, uses or supplies this in the course of their pension activities related to the pension plan. Taxable supplies are also deemed to be made where the employer uses an “employee resource” in the course of pension activities, where the consumption or use is not for the purposes of making a supply to the relevant pension entity.
Once an employer is deemed to have made a taxable supply, it must also self-assess the tax equal to the deemed tax collected.
Where an employer is required to account for tax twice on the same resource (once for an actual supply and again as a deemed supply), it may issue a tax adjustment note (TAN) to make an adjustment. In certain circumstances, the amendments eliminate the need to account for tax twice.
Relief from accounting for the tax on deemed taxable supplies applies to a “selected qualifying employer” who meets specific conditions as follows:
- the employer must not have an election in effect to treat actual taxable supplies to the pension entity as having been made for no consideration;
- the employer must not have become a participating employer of the pension plan in the particular fiscal year; and
- the percentage amount determined by the formula A/(B-C) must be less than 10%, with element A being less than $5,000.
Each element of this formula is discussed in the bulletin, along with details relating to new participating employers, mergers and amalgamations, and the winding-up of a subsidiary.
The new legislation allows a participating employer of a pension plan to jointly elect with the pension entity of the plan, to treat certain actual taxable supplies by the employer to the pension entity, as being made for no consideration for GST/HST purposes. This election generally makes both parties eligible to not account for tax on actual supplies made by the employer to the pension entity. This also eliminates the need for the employer to issue a TAN, if the employer is relieved from having to account for tax on the actual or deemed supplies.