Possible rebate for GST Paid on Certain Investment Management Fees

“Do not be surprised if the rebate claim is denied.”

Based on the recent Federal Court of Appeal decision in Canadian Medical Protective Association (CMPA), taxpayers may be able to recover GST paid on certain investment management fees paid over the past two years.

The CMPA obtained a rebate of GST it had paid on discretionary investment management fees as “GST paid in error.” The Court of Appeal ruled that the investment management services were “arranging for” the transfer of securities, which is an exempt financial service under the GST.

A person who has paid a significant amount of GST on this type of investment management service over the past two years, may want to make a rebate claim by filing a Form GST189 (available at cra.gc.ca/forms) with the Canada Revenue Agency within two years of when the GST was paid.

If the investments are in a corporation, partnership or trust whose “principal activity is the investing of funds,” or in an “investment plan” such as an RRSP, then the rebate is less likely to be available.

Do not be surprised if a rebate claim is denied. The CRA is still considering its response to the CMPA case, and may reject all such claims on the basis that the facts are not identical to CMPA. If a claim is denied a Notice of Objection and possibly an appeal to the Tax Court of Canada can be considered. However, an objection cannot be filed if a claim is not made within the two-year deadline. Note also that any rebate you receive may effectively be taxable for income tax purposes, reducing the value of the rebate.

If you have a significant amount at stake and wish to pursue a claim for the GST you paid your investment advisors, please contact your TSG tax professional and we will be pleased to assist you with the process.

TAX TIP OF THE WEEK is provided as a free service to clients and friends of the Tax Specialist Group member firms. The Tax Specialist Group is a national affiliation of firms who specialize in providing tax consulting services to other professionals, businesses and high net worth individuals on Canadian and international tax matters and tax disputes.

The material provided in Tax Tip of the Week is believed to be accurate and reliable as of the date it is written. Tax laws are complex and are subject to frequent change. Professional advice should always be sought before implementing any tax planning arrangements. Neither the Tax Specialist Group nor any member firm can accept any liability for the tax consequences that may result from acting based on the contents hereof.

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