3 October 1997 GST/HST Interpretation HQR0000794 - Application of the Goods and Services Tax to Fees Associated with Self-Directed Registered Retirement Savings Plans ("RRSPs") and Self-Directed Registered Retirement Income Funds ("RRIFs")

Dear XXXXX

Thank you for your facsimile message of August 5, 1997 regarding the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to fees associated with self-directed RRSPs and RRIFs. We discussed this matter during telephone conversations of August 28, 1997 and September 9, 1997 during which time I requested additional information with respect to the various fees. In response to my request, a facsimile copy of a "Service Fee Schedule 1997 Self-Directed Plans" was sent on September 9, 1997.

Interpretation Requested

In your facsimile message you state that XXXXX as trustee, administers self-directed RRSPs and RRIFs. There are various fees associated with these plans (as outlined in XXXXX which include: an annual trustee fee, fees for processing security transactions (i.e. the purchase and sale of securities within the self-directed plan), fees for partial withdrawals or transfers from the RRSP and a full withdrawal or termination fee if the account is closed or transferred. When securities are purchased or sold using XXXXX broker, no fee is charged to the self-directed plan. However, when the client directs some other broker to purchase or sell securities within the self-directed plan, XXXXX charges a processing fee. Each of the fees associated with the above are usually taken from the plan, not paid directly by the client. Currently, XXXXX charges the GST at a rate of 7% on the annual trustee fee. You request confirmation that the other fees are subject to the GST at a rate of 7%.

Interpretation Given

Generally, self-directed RRSPs and RRIFs are trusts. Administrative services provided to a trust are not included in the definition of "financial service" in subsection 123(1) of the Excise Tax Act (the "Act"). As outlined in the XXXXX the annual trustee fee, the fee for processing security transactions, the fee for partial withdrawal or transfer from the RRSP and the full withdrawal or termination fee if the account is closed or transferred are all fees for services that do not fall within the definition of "financial service". Therefore, each service is subject to the GST at a rate of 7%. Please note that the fees for administration services that banks charge on their non-trust RRSPs are exempt from the GST since these services are included in paragraph (b) of the definition of "financial service", that is, the operation of a deposit account.

On April 1, 1997, the harmonized sales tax (HST) replaced the goods and services tax (GST) and the provincial sales tax (PST) in the three participating provinces of Nova Scotia, New Brunswick and Newfoundland with a harmonized tax rate of 15%. If you supply services to be performed in a participating province, to the extent that the service is a taxable supply, tax must be collected at the harmonized rate.

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the Excise Tax Act, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST Memoranda Series, do not bind the Department with respect to a particular situation.

For your convenience, I have enclosed a copy of GST Technical Information Bulletin B-060 "Listing of Taxable, Exempt and Zero-Rated Products and Services of a Deposit-Taking Financial Institution". The services listed under T-048 of the bulletin relate to your enquiry. If you have any further questions or would like to discuss this matter, please contact me at (613) 957-8222.

Yours truly,

Tim A. Krawchuk
Rulings Officer
Financial Institutions Unit
Financial Institutions & Real Property Division
GST/HST Rulings and Interpretations Directorate

Encl.: GST Technical Information Bulletin B-060

Legislative References: ss. 123(1) - "financial service", ss. 165(1)