Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
[Addressee]
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
Case Number: 132886
July 6, 2011
Dear [Client]:
Subject:
GST/HST INTERPRETATION
Election to share pension entity rebate
Thank you for your letter of February 2, 2011, concerning the ability of a pension entity and the participating employers of a pension plan to jointly elect to share a pension entity rebate pursuant to subsections 261.01(5), (6) or (9) of the Excise Tax Act ("ETA").
All legislative references are to the ETA unless otherwise specified.
ISSUES
Firstly, you note that, with respect to multi-employer pension plans, there exists the possibility that certain employers may not wish to be party to the subject elections while others would. In this regard, you have asked if all of the participating employers in the particular pension plan would be required to sign the election, regardless of whether they will be sharing part of the rebate.
Secondly, based on your statement that certain pension entities may be precluded by certain plan agreements and applicable laws from granting any part of the pension entity's rebate entitlement to an employer, you are concerned with the notion that the aforementioned provisions of the ETA imply that the trustee may make the election, notwithstanding that such agreements and laws would stipulate the contrary.
INTERPRETATION
Legislation
Briefly, under subsections 261.01(5) and (6), a pension entity that is entitled to a rebate will be able to make an election to essentially transfer some or all of the entity's rebate entitlement to qualifying employers. Pursuant to subsection 261.01(9), a non.qualifying pension entity may also elect to transfer to qualifying employers amounts that would have been available to the entity as a rebate had it been a qualifying pension entity. The qualifying employer would then be able reduce its net tax in respect of the transferred amount.
First issue
Subsections 261.01(5), (6) and (9) will only apply where the pension entity in question makes an election jointly with all persons that are, for the calendar year that includes the last day of the claim period, qualifying employers of the pension plan. For this purpose, a "qualifying employer" of a pension plan for a calendar year is a participating employer of the pension plan that is a registrant and that:
(a) made pension contributions to the pension plan in the immediately preceding calendar year; and
(b) in any other case, was the employer of one or more active members of the pension plan in the immediately preceding calendar year.
In the case where a pension entity makes an election under any of the aforementioned provisions, each qualifying employer of the pension plan would be required to make the election jointly with the pension entity, notwithstanding that a particular qualifying employer may not obtain any part of the rebate. To this end, the authorized representative of each qualifying employer of the pension plan is required to sign the election in form RC4067. This requirement is stated in Parts E and F of that form.
Second issue
Elections available under subsections 261.01(5), (6) and (9) are permissive: it is not mandatory for a pension entity to share its rebate entitlement with an employer.
The decision by a pension entity to make an election pursuant to subsections 261.01(5), (6) or (9) to share the rebate is one that would presumably take into consideration any mitigating factors such as the legal impediments that you describe. Whether the authority exists to make the election must be determined by the pension entity. CRA will accept a duly authorized election subject to future audit to ensure compliance with the provisions of the ETA as written.
Lastly, we wish to acknowledge your suggestion that pension entities of multi-employer pension plans should be precluded from the ability to make the elections in subsections 261.01(5), (6) and (9). However, the CRA's mandate is to administer the ETA and its regulations as enacted by the Parliament of Canada. Amendments to the ETA and its regulations fall within the purview of the Department of Finance.
The foregoing comments represent our general views with respect to the subject matter of your request. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, do not bind the Canada Revenue Agency with respect to a particular situation. Future changes to the ETA, regulations, or our interpretative policy could affect this interpretation.
We trust that this will be of some assistance. If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-8816.
Yours truly,
Paul Hawtin
Specialty Tax Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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