Investment limited partnerships with offshore subs or Opco subs should consider making an ETA s. 225.4(6) election in order to potentially access ITCs

Most Canadian resident investment limited partnerships (ILPs) will be considered to be a selected listed financial institution (SLFI) for the 2019 year, thereby giving rise to an obligation to file a SLFI return by June 30, 2020.

In typical circumstances, unless an election is made under ETA s. 225.4(6) for s. 225.4(3) not to apply:

• ETA s. 225.4(3)(a) effectively deems non-resident unitholders of an ILP to be resident in Alberta for purposes of computing the blended rate of provincial tax to which the ILP is subject under the SLFI rules; and
• s. 225.4(3)(d) provides that the ILP is not entitled to claim input tax credits for an input that is not an “exclusive input” (e.g., for a supply of a management service that is “acquired” by the ILP for the purpose of both making a zero-rated financial-service supply to a non-resident subsidiary under Sched. VI, Pt. IX, s. 1, and for making exempt supplies of financial distributions to resident unitholders)

It is suggested that since “an ILP may undertake certain activities which allow it to claim ITCs, including making zero-rated supplies of financial services to non‑residents or, pursuant to proposed amendments to section 186 of the ETA, holding shares or debt in related corporations whose property (all or substantially all) was last acquired for use exclusively in a commercial activity,” consideration should be given to making the s. 225.4(6) election, so as to access or increase ITC claims (i.e., oust the second rule above).

Neal Armstrong. Summaries of PwC, Tax Insights: Investment limited partnerships ─ GST/HST & QST filing obligations, Issue 2020-27, May 04, 2020 under ETA s. 123(1) – ILP and s. 225.4(6).