Originally published in Blakes Bulletin on Tax, October
Pursuant to draft legislation and regulations to the Excise Tax
Act (ETA) that the Canada Revenue Agency (CRA) is currently
implementing as though they are in force, a "pension
entity" (i.e., a trust or corporation that is governed by a
registered pension plan) is a selected listed financial institution
(SLFI) if the plan has members resident in a participating HST
province and any other province.
There is currently no statutory requirement for an SLFI to
register for GST/HST purposes unless it has filed particular
elections with the CRA. However, there may be an administrative
advantage for a pension entity to register for GST/HST purposes
even without having filed such elections. In its May 2011 GST/HST
Notice No. 265, the CRA published its interpretation of the filing
requirements for SLFIs, and they are potentially onerous,
especially for SLFIs that are not registered for GST/HST.
This may come as a surprise to many who think that non-GST/HST
registrants are generally exempt from filing GST/HST returns with
In particular, a non-registered SLFI is required to file monthly
GST/HST returns and a final annual return (Form GST494) –
13 returns in all each year. The monthly returns are filed on Form
GST62, a non-personalized GST/HST return that until recently was
only available from the CRA in paper format – electronic
copies are now available on the CRA website. Although these monthly
returns will likely report nil GST/HST collected and no input tax
credits claimed, a failure-to-file penalty may result if the return
is not filed. If an SLFI registers for GST/HST, on the other hand,
it is only required to file a single, annual final return (Form
GST494), six months after its fiscal year-end. On the final return,
the SLFI reports all the GST/HST it paid on inputs across Canada,
and effectively calculates a "blended" rate of GST/HST
which can result in either a refund or an amount payable at
year-end, depending on various factors. It is therefore critical
that a pension entity file its GST/HST returns and it is generally
advantageous for a pension entity to register for GST/HST to reduce
its filing requirements.
There is an exception to the SLFI rules for certain
"qualifying small investment plans" (QSIPs), which
includes pension entities where the GST (i.e., the 5% federal
portion of the HST only) paid by the pension entity in the
preceding fiscal year that was not recoverable by way of input tax
credit is less than C$10,000. Note that this C$10,000 threshold
includes all GST that is deemed to have been paid by the pension
entity to a "participating employer" as defined in the
ETA, pursuant to section 172.1 of the ETA. A QSIP is generally not
an SLFI and is therefore not subject to the SLFI filing
requirements, although detailed rules regarding a QSIP's recent
past status under the regulations may place it within the SLFI
regime. A QSIP can also elect to be treated as an SLFI if it wishes
to take advantage of the effective "blended" GST/HST rate
Note that a pension plan that is funded by an insurance contract
is not caught within the definitions in the ETA regarding pension
entities and pension plans, and the deeming rules in section 172.1
of the ETA are therefore not currently applicable to such plans.
These pension plan arrangements are currently under review by the
Department of Finance.
There is further relief from the SLFI regime for pension
entities that have 10% or less of the total number of members of
the plan resident in participating (i.e., HST) provinces at every
point in the taxation year, and where the value of the assets of
the pension plan (or in the case of a pension entity of a defined
benefit pension plan, the value of actuarial liabilities of the
pension plan) that are reasonably attributable to members resident
in HST provinces was less than C$100-million during its preceding
fiscal year. If both of these conditions are satisfied, the pension
entity would not be considered an SLFI and would not be subject to
the SLFI filing requirements.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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