The CRA says it will release a letter about the tax treatment of trailing commissions to third-party tax publishers in February and post a notice and GST/HST news article on the CRA’s website by the end of March.Justin Tang/The Canadian Press
Investment industry groups are pushing back against a recent Canada Revenue Agency (CRA) decision to treat mutual fund trailer commissions as being subject to GST/HST, which reverses the agency’s 35-year position on the issue.
Specifically, the groups are asking the CRA to reconsider its decision, arguing, in part, that it will be impossible for the industry to meet the July 1 effective date.
“There is strong consensus among our members that, if the policy change proceeds, the proposed implementation timeline cannot be met,” said Rochelle Roye, communications manager of the Securities and Investment Management Association (SIMA) in an statement sent by e-mail to The Globe and Mail.
“The scope of required systems changes, combined with the need for industry and advisor education, raises significant implementation risks.”
Ms. Roye said SIMA is engaging with the Department of Finance with respect to the effective date and continues to be in communication with the CRA.
In a letter sent to the Department of Finance and the CRA Jan. 23, Annie Sinigagliese, chief executive officer of the Canadian Independent Finance and Innovation Counsel (CIFIC), asked the government to maintain trailing commissions as an exempt financial service for GST/HST until it consults with stakeholders.
“We are concerned that this position reversal appears to have been adopted without a full appreciation of its practical implications and without delivering any incremental benefit to the CRA, investors or the broader Canadian capital markets,” Ms. Sinigagliese said in the letter.
She also pointed out that investment dealers are already “heavily engaged” in implementing processes to comply with the Canadian Securities Administrators’ total cost reporting requirements, which are set to take effect next year.
Some industry firms say they were blindsided when they learned of the CRA’s reversal in its longstanding administrative position on trailer fees.
The agency didn’t formally announce its change in position. Instead, it communicated the new interpretation in a letter to SIMA on Dec. 22, 2025.
The CRA letter was in response to a 2023 letter from SIMA in which the association argued all dealers who receive trailing commissions should be exempt from GST/HST, including in certain excepted circumstances, such as after buying a new book of business from another advisor.
The CRA’s response was to change its position on trailing commissions altogether, stating investment firms were paid trailing commissions for “ongoing support, servicing and advice,” rather than just sales transactions.
Ms. Roye said SIMA has been communicating with its fund manager and dealer members about the issue “for quite some time through established committees and other communication channels.”
However, Ms. Sinigagliese told The Globe she first learned of the CRA’s policy reversal when an industry contact forwarded her a Jan. 14 bulletin published by EY Canada announcing the CRA’s policy reversal.
EY Canada has participated, on a pro bono basis, in conversations between SIMA and the CRA on the issue.
When she informed the group’s 42 investment dealer members of the news, “the phone started ringing,” Ms. Sinigagliese says.
Mark Kent, chairman and chief executive officer of Portfolio Strategies Corp. in Calgary, says the CRA’s policy reversal “seems to be just a massive make-work project that caught the investment industry off guard. A lot of [firms] don’t think they can get this solved by July 1.”
Matthew Latimer, executive director of the Federation of Independent Dealers, says he was “shocked” at the CRA’s method of “non-announcement,” relying on a technical interpretation letter to alert the industry. The reversal in the CRA’s position would have “outsized impacts” to dealer firms, he says.
In a response sent by e-mail to questions from The Globe, CRA spokesperson Nina Ioussoupova said the agency would release a letter about the tax treatment of trailing commissions to third-party tax publishers in February and post a notice and GST/HST news article on the CRA’s website by the end of March.
The CRA said that “mutual fund dealers who are registrants for GST/HST purposes will be required to apply, collect, and remit GST/HST on supplies of services in exchange for trailing commissions. Such commissions are invoiced to mutual fund managers and the associated GST/HST will generally be recoverable by these managers as input tax credits.”
Industry stakeholders say the change is expected to add significant costs without necessarily raising additional revenue for government, as fund managers would be eligible to claim offsetting input tax credits.
“If it’s just creating costs and burden, and there’s no benefit to the CRA, there’s no benefit to the industry [and] there’s no benefit to the investors, why are we doing it?” Ms. Sinigagliese says.
However, some industry stakeholders say investors would eventually bear the burden of the additional costs incurred to implement the change.
“All costs are paid at the end of the day by the one wallet, which is the investor’s,” Mr. Latimer says.