Canada: General Partner Distributions: Subject To GST/HST?

Last Updated: September 19 2017
Article by Neil Bass and Angelo Gentile

On September 8, 2017, the Department of Finance ("Finance") released a series of draft legislative changes to the Excise Tax Act (Canada) (the "ETA"). Of particular note is legislation that will have broad ranging impact on limited partnerships that are engaged in investment activities including investment in other partnerships.

Do these rules apply to your limited partnership?

These new rules apply to "investment limited partnerships." This newly defined term includes limited partnerships ("LP"), the primary purpose of which is to invest funds in property consisting primarily of financial instruments (which includes equity securities, debt securities, insurance policies, interests in partnerships, trusts, or any options / guarantees in respect of the foregoing), and that meet one of the following two conditions (i.e., (a) or (b)):

  • (a) Either (i) the LP itself is represented/promoted as a hedge fund, investment limited partnership, mutual fund, private equity fund, venture capital fund or other similar collective investment vehicle, or (ii) the LP is part of an arrangement or structure that is represented/promoted as a hedge fund, investment limited partnership, mutual fund, private equity fund, venture capital fund or other similar collective investment vehicle; OR
  • (b) The total value of all interests in the LP held by "listed financial institutions" is 50% or more of the total value of all interests in the LP.

LPs that would fall into Category (a) above include LPs in tiered investment fund structures such as master-feeder funds or fund-of-funds. It is not clear what it means for the LP to be represented or promoted, particularly where no particular registration or licensing is required for the partnership to undertake the activities. It is easy to envision many circumstances where the status as an "investment limited partnership" will turn on whether the partnership is represented/promoted as a particular investment vehicle. 

LPs that would fall into Category (b) above include any LP used as an investment vehicle for, or a funding medium for investing on behalf of, "listed financial institutions" (which includes banks, among others, insurers, lenders, traders/dealers of financial instruments, credit unions, investment plans and persons whose primary business is the lending of money).

This new definition for "investment limited partnership" (or "Investment LP") will be deemed to come into force effective September 8, 2017.

An LP which invests exclusively and directly in real property would not constitute an Investment LP. In contrast, an LP that invests exclusively in partnership interests of other partnerships could constitute an Investment LP if it meets the conditions of either of paragraph (a) or (b) above. This might include, for instance, an LP that invests in subsidiary LPs engaged in investments in real property, where 50% or more of the LP interests are held by a pension plan.

Neither the draft legislation nor the Explanatory Notes specify how to interpret the phrase "primary purpose." To the extent an LP is engaged in both investment in financial instruments and investment in real property directly, this consideration becomes particularly important.

What happens if an LP is considered to be an "investment LP"?

There are 3 notable GST/HST consequences if an LP is considered to be an "investment LP" for purposes of the ETA.

First, by virtue of new draft subsection 272.1(8) of the ETA, a general partner (a "GP") of an Investment LP that provides management or administrative services to the Investment LP will be required to charge, collect and remit the applicable GST/HST in respect of its management or administrative services. By virtue of existing subsections 155 and 272.1(3) of the ETA, the value of the consideration for the GP's services is either (a) the actual amount of the partnership draw that the GP receives, in cases where the Investment LP can claim a full input tax credit ("ITC") in respect of the GST/HST payable on the GP distributions, or (b) the fair market value of the management or administrative services rendered by the GP, in cases where the Investment LP cannot claim full ITCs. This new rule applies for all amounts distributed to GPs of investment LPs on or after September 8, 2017. This rule will also apply retroactively to the extent the GP previously charged, collected or remitted GST/HST in respect of past payments from the Investment LP.

Second, by virtue of the proposed amendment to the definition of "investment plan" in subsection 149(5) of the ETA, an Investment LP will be added to the definition of "investment plan". This means that Investment LPs will fall within the definition of "listed financial institution" within the meaning of subparagraph 149(1)(a)(ix) of the ETA. In short, this results in new compliance burdens:

  • Potential requirement to file Form GST111, to the extent the Investment LP is a "reporting institution" within the meaning of section 273.2 of the ETA. Failure to file Forms GST111 as and when required can lead to potentially severe penalties; and
  • Potential for Investment LPs to be classified as "selected listed financial institutions" (or "SLFIs") within the meaning of the ETA, which carries with it additional onerous filing and reporting requirements.

Third, an Investment LP that is also a SLFI will be automatically switched, by operation of new draft subsection 244.1(4) of the ETA, to a calendar year fiscal period for GST/HST purposes commencing January 1, 2019.

There's More!

The draft legislation includes many other provisions affecting partnerships, pension plans and drop-shipments. Some of the proposed legislation has been previously announced, but the draft legislation may differ significantly from previously-announced changes.


These proposed amendments are complex and, to the extent they apply, will result in (potentially unrecoverable) GST/HST payable on GP distributions and create onerous GST/HST compliance obligations that previously may not have existed for the limited partnership.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Torys LLP
Osler, Hoskin & Harcourt LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Torys LLP
Osler, Hoskin & Harcourt LLP
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions