1 July 1996 GST/HST Interpretation 11585-32[8] - Input Tax Credit Entitlement of a Trust Governed by a Multi-employer Pension Plan

Dear Sir:

This is in reply to your letter of February 9, 1996 concerning the input tax credit entitlement of the XXXXX (the "Fund") under Part [I]X of the Excise Tax Act (the "Act").

You inform us that the Fund is a trust governed by a pension plan which is a multi-employer pension plan. The plan provides pension benefits to more than XXXXX employees and former employees of many participating employers in the XXXXX industry. The Fund was established pursuant to an Agreement and Declaration of Trust. An administrator is hired by the trustees of the Fund to administer the Fund and the pension plan.

You state that the Fund is a trust and is therefore a "person" for purposes of subsection 123(1) of the GST legislation. It is engaged in "commercial activities" to the extent that it delivers the administrative services to the participating employers of the plan. Hence, the Fund (a GST registrant) should be eligible for input tax credits to the extent of the GST payable by it for supplies acquired for use in the course of delivering these administrative services to the employers.

In a multi-employer pension plan (a "MEPP"), there is no mechanism for the plan trust to invoice the numerous participating employers on a transaction basis and collect GST for providing the administrative services to the employers by the plan trust as in a single employer pension plan.

You suggest that the Department adopt a position on the same premise as the policy on single employer pension plans (as outlined in TIB B-032R) when the plan trust is not a GST registrant, and permit the plan trust in a MEPP to claim the ITC without having to collect the GST from the employers. The collection of the GST from the participating employers by the plan trust and the subsequential recovery of the ITC by the employers should be deemed to have occurred without the plan trust actually collecting the GST and the employers actually claiming the ITC. Given that the amount claimed by the employers would equal the tax collected, the deeming would be tax neutral.

Our Comments:

We agree with you that a trust governed by a registered pension plan will qualify as a "person" for purposes of Part [I]X of the Act, and hence may be eligible to claim input tax credits under the provisions of the Act. However, if the Fund does not use the supplies acquired to actually make a taxable supply of the administrative services to the participating employers or does not charge the employers a consideration for the supply, the Fund cannot be said to have acquired those supplies for use in the course of its commercial activities. Under these circumstances, it is our view that there is no legislative basis to allow the Fund input tax credits for GST paid or payable on those supplies. Further, in a multi-employer pension plan, if the plan trust is NOT a GST registrant, there is no basis to allow the plan trust to claim any input tax credits on its purchases under the current legislation.

We trust our comments will be of assistance.

Yours truly,

J. Sitka
A/Director
Financial Institutions and Corporate Re-organizations Division
GST Rulings and Interpretations