As part of a response to an inquiry as to the application of HST to services made by the manager (MangeCo) of an exchange-traded mutual fund trust (TrustCo), CRA stated:
The amounts that can be transferred where a tax adjustment transfer election is in effect between an investment plan and manager vary depending on whether or not a reporting entity election under section 56 of the draft SLFI Regulations is also in effect. Where a tax adjustment transfer election under section 58 and a reporting entity election under section 56 of the draft SLFI Regulations are both in effect for a reporting period, the tax adjustment transfer amount would be the positive or negative net tax adjustment amount determined by the application of the SAM formula in subsection 225.2(2). Where only the tax adjustment transfer election under section 58 of the draft SLFI Regulations is in effect for a reporting period without a reporting entity election under section 56 of the draft SLFI Regulations, the tax adjustment transfer amount allowed to be transferred to the investment plan manager would generally be limited to the provincial part of the HST with respect to supplies made by the manager to the SLFI investment plan in applying the SAM formula in subsection 225.2(2). If there is a positive net tax adjustment (i.e., an amount owed by the investment plan) this liability with respect to the provincial part of the HST of the investment plan would be an adjustment to be added when determining the net tax of the investment plan manager. If there is a negative net tax adjustment (i.e., the investment plan would be eligible for a credit), where the investment plan manager has credited that amount of the provincial part of the HST to the investment plan, this credit would be an adjustment to be deducted when determining the net tax of the investment plan manager.
