6 May 1998 GST/HST Interpretation HQR0001066 - Administration Services With Respect to Self-Directed RRSPs and RRIFs Where the Annuitant is a Non-Resident

                                                                        GST/HST Rulings and Interpretations
Directorate
Place Vanier, Tower C, 10th Floor
25 McArthur Road
Vanier, Ontario
XXXXX                                                                                 K1A 0L5

Dear Sir:

I refer to your letter dated November 3, 1997 regarding the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to administration services with respect to self-directed RRSPs and RRIFs.

Our understanding of the facts is as follows:

Statement of Facts

•   Administration services are provided with respect to self-directed RRSPs and RRIFs. A fee is charged for these services.

•   The applicant, referred to as the 'Annuitant' in the declaration of trust, is an individual who is considered to be a non-resident for purposes of the Income Tax Act.

•   The fee for the administration services with respect to the self-directed RRSP may be taken directly from the plan or paid by the Annuitant outside of the plan.

Interpretation Requested

What is the tax status of self-directed RRSP and RRIF administration services where the annuitant is a non-resident?

Interpretation Given

Where the annuitant is a non-resident and the fee for the administration service is taken from the plan (i.e. the trust), the supply of the administration service is subject to the GST at a rate of 7% pursuant to subsection 165(1) of the Excise Tax Act (the "Act").

Where the annuitant is a non-resident and the fee for the administration service is paid by the non-resident outside of the plan, the supply of the administration service is zero-rated pursuant to Schedule VI, Part V, section 7 to the Act.

Analysis

Self-directed RRSPs and RRIFs are set up as trusts. In most cases, and the case at issue, the trust is created by a "Declaration of Trust".

Subsection 132(1) of the Act deems certain persons in certain circumstances to be resident in Canada. Subsection 132(1) refers, in part, to corporations, partnerships, clubs, labour unions and individuals, but does not refer to trusts. Given that the Act is silent with respect to the residency of a trust, Interpretation Bulletin IT-447 has been used as a guide. IT-447 reads:

"... a trust is generally considered to reside where the trustee, executor, administrator, heir or other legal representative who manages the trust or controls the trust assets resides. ..."

With respect to self-directed RRSPs and RRIFs, the management and control of the trust rests with the trustee and, given that the trustee is resident in Canada, the trust is also considered to be resident in Canada.

Recipient of the Administration Service

The administration fee, with respect to the self-directed RRSP, is either payable by the trust (the fee is taken directly from the plan), or by the annuitant (where the individual pays the fee outside of the plan). Where there is an agreement, pursuant to paragraph (a) of the definition of "recipient" in subsection 123(1) of the Act, the recipient of the supply of the administration service is the person liable under the agreement to pay the consideration.

Trust as Recipient - Fee Taken From Plan

Where the annuitant is a non-resident and the fee for the administration service is taken from the plan (i.e. the trust), the trust is considered to be the recipient of the supply of the administration service. The trust is considered to be resident in the location where the trustee resides. As the trustee is resident in Canada, the trust is considered to be resident in Canada and, consequently, the supply the administration service is subject to the GST at a rate of 7% pursuant to subsection 165(1) of the Act.

Individual as Recipient - Fee Paid Outside the Plan

Where the annuitant is a non-resident and the fee for the administration service is paid by the non-resident outside of the plan (i.e. by the individual), the individual is considered to be the recipient of the supply of the administration service. As the individual is a non-resident, the supply of the administration service is zero-rated pursuant to Schedule VI, Part V, section 7 to the Act.

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 goods that are delivered or made available in a participating province, services to be performed in a participating province or intangible personal property that may be used in a participating province, to the extent that they are taxable supplies (which are not zero-rated), 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.

Should you have any further questions or require clarification on the above matter, please do not hesitate to 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

Casework Number:                 HQR0001066

File numbers:                          11655-4, 11635-8, 11635-9