The Canada Revenue Agency announced an 18-month extension for dealers and independent advisors to start collecting and remitting GST/HST.Sean Kilpatrick/The Canadian Press
The Canada Revenue Agency is giving wealth management firms and independent advisers until Jan. 1, 2028, to begin charging GST/HST on mutual fund trailing commissions.
The new implementation date for the CRA’s revised policy on GST and trailing commissions is an 18-month extension from the original deadline of July 1.
In updated guidance published on Tuesday, the agency said the extension would “provide the industry time to implement the necessary system changes and procedural adjustments.”
The CRA added it was “encouraging” dealers to begin applying and remitting GST on trailer fees “as soon as possible.”
Earlier this year, the CRA said trailing commissions would be subject to GST/HST, reversing its long-standing position. Dealers and independent advisers would have had to start collecting and remitting GST/HST starting July 1.
There have been some regulatory and operational changes in the mutual fund industry during the past few years, the CRA said, prompting it to revisit the application of the GST/HST to trailing commissions.
Wealth management industry groups had been asking the Department of Finance and the CRA for an extension to the implementation date, saying fund companies and dealer firms would be challenged to have systems in place to charge and remit GST by July 1.
In mid-May, the CRA told the groups it would defer the implementation date, according to an alert issued by EY Canada, but the new date wasn’t announced until Tuesday.
The CRA, in its updated guidance, also provided administrative information for the transition period before the new implementation date.
The CRA said if a dealer claims input tax credits for GST/HST they paid in relation to providing services for trailing commissions, it will enforce the dealer’s GST/HST remittance before Jan. 1, 2028.
Tariq Nasir, partner, indirect tax at EY Canada, said in an e-mail to The Globe and Mail that the CRA’s position may require dealers that are already registered for GST/HST to be “extremely careful with determining how they are claiming any input tax credits,” so as not to trigger an obligation, inadvertently, to collect and remit GST/HST early.
Jason Bobee, president of Portfolio Strategies Corp. (PSC) in Toronto, said his firm has been working with fund companies and intermediary FundServ Inc. on back-office system changes to allow for the tracking of GST/HST and the division of those payments with advisers.
The firm has asked advisers to provide their GST numbers, he said in a response sent by e-mail last week to questions from The Globe after EY Canada announced the extension.
“Some advisers may already have a GST/HST number for insurance or other business activities, although this is separate from [Portfolio Strategies’] investment business,” Mr. Bobee said.
With the implementation date confirmed, the company will remind advisers they’re now responsible for remitting their portion of the GST to the CRA.
“Advisers who obtain a GST/HST number would work with their own tax advisers to ensure accurate remittance based on the tax flow information provided,” he said.