Three years ago, on May 19, 2010, the Minister of Finance
released proposed changes to the application of the harmonized
sales tax (HST) to financial institutions. At the time, the
relevant government authorities had determined that changes were
"necessary to the existing [selected listed financial
institutions 1] SLFI rules to ensure that the rules
achieve the intended result in the context of the expanded and
modernized HST framework" following the adoption of the HST
regime by British Columbia and Ontario. After the subsequent
publication of draft rules and regulations in June 2010 and January
2011, the Federal Government on May 8th of this year finally
released a voluminous document containing the final version of the
Selected Listed Financial Institutions Attribution Method
(GST/HST) Regulations (the Regulations). The adoption of the
Regulations allows SLFIs to validate what has up to now been the
temporary application of certain rules. In addition, since the
Regulations also include some new measures, SLFIs should determine
whether those measures impact their businesses.
The Regulations provide important details relating to the
application of the special attribution method (SAM). SLFIs are
obliged to make a specific adjustment to their net tax using the
SAM formula when they declare their net tax. The calculation
establishes the provincial portion of the HST for participating
provinces that is payable by the SLFIs. SLFIs will therefore have
to carefully review the Regulations to determine whether changes
are required to their SAM calculation.
The final version of the Regulations also provides several
clarifications relating to the filing obligations of SLFIs, for
both monthly and quarterly returns (using form GST34 if the SLFI is
registered for GST/HST purposes) and annual returns (by completing
prescribed form GST494). We also note that the annual return must
be filed by an SLFI even if the latter is not registered under the
GST/HST regime. An annual information return (using form GST111)
must also be filed by certain SLFIs. The Regulations provide for
significant penalties if the relevant forms are filed late or not
filed at all. It is, therefore, essential that SLFIs take the
necessary precautions to ensure that they comply with the
Since the Regulations are now finalized, corresponding
legislative changes to the Quebec sales tax (QST) should be
announced in the near future by the Quebec Government. It should be
recalled that in March 2012, the Quebec Government committed under
the Canada-Quebec Comprehensive Integrated Tax Coordination
Agreement to harmonize the Quebec QST regime with the GST regime,
including its rules on SLFIs. The Quebec Government preferred,
however, to await the final version of the Regulations before
adopting a harmonized version.
1.The concept of SLFI includes, inter
alia, banks, investment dealers, trust and loan corporations,
insurance companies, credit unions, investment plans and any person
whose principal activity consists of lending money.
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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