The Minister of Finance recently released draft legislation relating to the goods and services tax/harmonized sales tax (GST/HST) insofar as it relates to the financial services sector.
Among many proposed measures, the following were announced:
- An amendment to the rules which apply to taxable imports of services and intangibles between separate branches of the same person;
- A new rule which requires the Financial Institution with a presence outside Canada to self-assess GST/HST on certain expenses incurred outside Canada which relate to its Canadian activities;
- Financial Institutions are entitled to claim input tax credits to recover GST/HST paid on inputs used to make taxable supplies but cannot claim input tax credits to recover GST/HST paid on inputs used to make exempt supplies. Where an input is used to make both taxable and exempt supplies, the Financial Institution must apply a method to allocate the use of that input. Amendments are proposed which will provide greater clarity to Financial Institutions respecting allocation methods. In addition, large banks, insurers and securities dealers will be required to use a prescribed method or to obtain a pre-approval from Canada Revenu Agency to use their own method; and
- An obligation for Financial Institutions to file an annual GST/HST information schedule, within 6 months after the end of the fiscal year. Finance Canada is consulting the Financial Institution industry prior to the release of the proposed new information schedule. Interested parties are invited to send their comments to the Department of Finance.
The foregoing provides only an overview. Readers are cautioned against making any decisions based on this material alone. Rather, a qualified lawyer should be consulted.
© Copyright 2007 McMillan Binch Mendelsohn LLP
