GST/HST to impact pension, benefit plans

The firm says the draft legislation will affect multi-jurisdictional pension plans, deferred profit sharing plans and benefit plans, requiring annual GST/HST self-assessment. In computing the tax applicable to a plan under the Excise Tax Act, the location of the plan’s members will be considered. A plan that has members in multiple provinces that include at least one province that charges HST will be subject to HST, while a multi-jurisdictional plan might face different HST rates for each province.

Service providers to a plan are typically required to charge GST or HST based on the location of the plan administrator or trustee that makes the purchase. Depending on the location of members, a plan might underpay or overpay sales tax.

Morneau Sobeco explains that every plan with members in two or more provinces, at least one of which is a province with HST, will be required to:

• calculate the amount of GST and HST that it should have paid during the year under a “Special Attribution Method”;
• file a GST/HST return as of the fiscal year-end of the plan;
• remit any residual HST due (or claim any rebate available for excess HST paid); and
• calculate a 33% GST pension rebate, if applicable.

“Changes to GST/HST rules leave some issues unresolved,” reads the bulletin. “For example, in jurisdictions such as Quebec, the proposals do not recognize the Quebec Sales Tax and consider Quebec to be a non-HST province. So, it will be interesting to see if there are developments in this regard. The proposals that will impact capital accumulation plans (CAP) concerning investment funds held are complex, and might expose the ultimate unitholders who are members or beneficiaries in non-HST provinces to HST expenses.”