GST/HST update: proposed changes to SLFI rules and June 30 filing deadline
On January 28, 2011, Canada’s Department of Finance proposed changes to the draft harmonized sales tax (HST) rules for financial institutions issued on June 30, 2010. The proposed changes outline a shift in pension entities’ responsibility for sharing HST-related information and describe new criteria for the application of selected listed financial institution (SLFI) rules to smaller pension entities with 90 per cent or more of their members residing outside HST provinces.
Pension entities should note that June 30, 2011 is the GST/HST filing deadline for SLFIs with a December 31, 2010 fiscal year-end. Related to this, the Department of Finance has relieved SLFIs of the requirement to file the GST111 Annual Information Return, as the information on this form is already collected through other HST-related filings.
Responsibility for sharing HST-related information and the criteria for application of SLFI rules
- Shift of responsibility to pension entities for sharing some HST-related information
Under the June 30, 2010 draft rules for determining HST obligations, when a pension entity invests in an “investee plan” such as a mutual fund or a pooled fund, the investee plan was generally responsible for obtaining either the residency of the underlying beneficiaries or provincial attribution percentage of the pension entity, and the number of units held by the pension entity on September 30 of a given year. The January 28, 2011 draft rules have shifted certain responsibilities from the investee plans to their investors. For example, where pension entities are SLFIs holding less than $10 million of units of the investee plan, pension entities now have to self-identify and provide the required information to the investee plan. Investee plans are still responsible for requesting the required information from investors that are not required to self-identify.
- Pension entities with less than $100 million of assets and less than 10 per cent of members in HST provinces are no longer be subject to SLFI rules
Under the June 30, 2010 draft rules, pension entities that incurred directly more than $10,000 of GST with even one member residing in an HST province were considered SLFIs and were required to make the associated SLFI tax filings. The January 28, 2011 draft rules provide, however, that a pension entity that has less than 10 per cent of its members residing in HST provinces and where the value of assets or actuarial liabilities attributable to those members is less than $100 million, that pension entity is not subject to the SLFI rules. Pension entities that are not SLFIs are still subject to other general HST rules (for example, self-assessment requirements for HST charged on purchases made from an HST province).
The above general information may not include all applicable rules and may not apply to your specific facts and circumstances. To learn how all the proposed changes apply to your plan, please consult your tax advisors. Details about the draft rules for financial institutions and other HST changes can also be found on the website of the Department of Finance in the News Release 2011-009 “Government Proposes Changes to Certain GST/HST Rules Relating to Financial Institutions.”
June 30 filing deadline for SLFIs with a December 31 fiscal year-end
With the new GST/HST rules for pension entities and the proposed SLFI rules, many pension plan administrators are in the process of finalizing annual GST/HST returns. For pension entities filing annually with a December 31 year-end, June 30, 2011 is typically the deadline for filing the updated GS T494 “GST/HST Final Return for Selected Listed Financial Institutions” form. This form and additional details are available on the Canada Revenue Agency’s (CRA) website.
SLFI pension entities no longer required to file GST111 – Annual Information Return (AIR)
As a result of the filing of HST elections related to the new SLFI rules (including the reporting entity election, consolidated filing election or the tax transfer election), many pension entities became registered for GST/HST. These entities could then have been required to file the GST111 – Annual information Return (AIR ) by June 30, 2011. It was announced in January 2011 that SLFIs are not required to file the AIR , as much of the information captured on this form will be reported on the aforementioned GS T494.
What is CIBC Mellon doing to assist clients with their HST responsibilities?
HST elections with the CRA can alleviate some of the administrative burden associated with GST/HST. Where a reporting entity election is filed between the administrator of an investment plan and the trustee of the assets in an investment plan, the administrator assumes the responsibility for filing HST returns on behalf of the investment plan. The consolidated filing election allows a single return to be filed for a consolidated group of investment plans, rather than separate returns for each plan for which an administrator is responsible. The tax transfer election allows any adjustments for the provincial component of HST required by investment plans to be transferred to the administrator of the investment plan.
The rules for elections apply to investment plans as defined by the Canada Revenue Agency (examples include registered pension plans, employee benefit plans, mutual fund trusts and pooled fund trusts). Where CIBC Mellon is trustee of the assets of an investment plan, the election process is shared between the investment plan manager (in the case of a pension entity, the administrator of the plan) and CIBC Mellon. In order to support the signing process CIBC Mellon will, as trustee and on client instruction, arrange for certification of the election form by the investment plan and return the forms to clients for submission to the CRA.
For more information about HST elections, please see our HST Q&A in the fall 2010 edition of Trade Talk, contact your relationship manager, or consult your tax advisors.
CIBC Mellon’s accounting reports will provide clients with information which may be required, including details about HST paid on plan expenses incurred during the year, so that clients may include the information in their GST/HST returns.
If you have any questions about how CIBC Mellon can support your organization as you comply with GST/HST rules, please contact your relationship manager.
By Peter Maden, vice president, institutional and pension accounting
Pension entities face penalties if they fail to comply with the proposed rules by the prescribed deadline.
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. There can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
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