The CRA provided details on its new approach to GST and trailing commissions in a notice released Tuesday.Justin Tang/The Canadian Press
Independent financial advisors will have to collect GST/HST on the mutual fund trailing commissions they receive from their dealer firms, the Canada Revenue Agency confirmed on Tuesday. Meanwhile, advisors who are employees of dealers won’t have to collect the tax on the mutual fund trailing fees they receive as part of their pay.
In a notice released Tuesday, the CRA provided details on its new approach to GST and trailing commissions after reversing its 35-year-old position late last year.
The agency reiterated its view that “most services supplied by mutual fund dealers in exchange for trailing commissions no longer meet the definition of financial service.”
That’s because “the definition of financial service specifically excludes the supply of advice and the supply of an asset management service,” the CRA’s notice states.
As a result, mutual fund dealers will have to apply, collect and remit the GST/HST on supplies of services made in exchange for trailing commissions. And “while this publication refers only to dealers, this tax treatment applies equally to the services of independent advisors that are not employees of a dealer.”
The CRA’s position appears to affect mutual-fund-licensed advisors disproportionately, most of whom work as principal agents, said Mark Kent, chairman and chief executive officer of Portfolio Strategies Corp. in Calgary, in an e-mail sent to The Globe and Mail. Most investment dealer advisors, on the other hand, work as employees.
Advisors at Mr. Kent’s firm, for example, are not employees.
The CRA’s notice reinforces the industry’s fear that the effects of the CRA’s policy change are “going to be very wide-ranging,” says Tariq Nasir, partner, indirect tax, financial services, with EY Canada in Toronto.
“If an advisor is an independent contractor, and your taxable revenue exceeds $30,000 and it’s coming from, in part or entirely, trailing commissions, then you’re going to be required to register [for GST/HST] and remit sales tax on it,” he says.
Nelson Cheng, chief executive officer of Sterling Mutuals Inc. in Windsor, Ont., told The Globe in an e-mail that while his company is registered for the GST/HST, “most of our advisors are not. Advisors at Sterling are independent agents.”
“This is going to be a big administrative headache for dealers,” Mr. Cheng added, without any additional revenue for the government.
Industry stakeholders have said that implementing the change is expected to add significant costs without necessarily raising additional government revenue, as fund managers, dealers and advisors would be entitled to claim input tax credits.
The CRA signalled its new policy position in a letter to the Securities and Investment Management Association in December, 2025, stating the change would be effective July 1.
The notice confirmed the agency is sticking to that date, encouraging dealers “to apply this tax treatment as soon as possible.”
“They seem to be doubling down on the July 1 date,” Mr. Nasir says, despite industry pushback.
Industry organizations have argued it will be impossible to meet the July 1 effective date.