Wealth management industry groups have been asking the CRA for more time to have systems in place for charging and remitting GST.Adrian Wyld/The Canadian Press
The Canada Revenue Agency has told wealth management industry associations that it will defer the implementation date for firms and advisors to begin applying and collecting GST/HST to mutual fund trailing commissions, according to EY Canada.
In a tax alert released Thursday, EY Canada said the CRA told industry groups on Wednesday it intended to grant “a material extension” to the implementation date, but did not indicate what the new date would be.
EY Canada said the CRA would provide further details about the enforcement of its administrative position “in a notice that will be published by the end of the month.”
The CRA was unable to respond immediately to questions from The Globe and Mail about the implementation date.
Earlier this year, the CRA said trailing commissions would be subject to GST/HST, reversing its long-standing position. Dealers and independent advisors would have had to start collecting and remitting GST/HST starting July 1.
Wealth management industry groups have been asking the Department of Finance and the CRA for more time, saying fund companies and dealer firms would be challenged to have systems in place to charge and remit GST by July 1.
Tariq Nasir, partner, indirect tax, at EY Canada, says he believes none of his wealth management clients would have been able to make the changes needed to comply with the CRA’s new administrative position by July 1.
EY Canada participated in discussions between the Securities and Investment Management Association and the CRA in a pro bono capacity.
The CRA was “initially skeptical” of the industry’s claims that firms couldn’t make the deadline, Mr. Nasir says, but came around to their position after several meetings with industry groups.
“It wasn’t just that [the CRA] dropped [this] positive development like a bombshell yesterday,” he says.
Peter Bowen, vice-president of tax and retirement research at Fidelity Investments Canada ULC, welcomed the CRA’s decision to defer the implementation, saying in an e-mail to The Globe that it would give “the industry and impacted financial advisors needed time to address significant operational and compliance challenges following its recent policy shift.”
Mr. Nasir says that despite the extension, it doesn’t appear the CRA will reverse its decision on applying GST to trailer fees.
“They feel that trailing commissions should have been taxable and they made that very clear,” he says.