CRA indicates that no ITCs were available to an employer regarding any charges by an insurer to segregated funds to fund retirement benefits to employees

An employer funded its obligations under pension plans for its employees by paying premiums under insurance policies to an insurer, which invested the premiums in pooled funds (i.e., segregated funds) whose values fluctuated with the value of specified investments. The insurer agreed under the polices to pay benefits to the employer, based on segregated fund values, generally when the employees retired or died.

Amounts in respect of annual investment management fees (“IMFs”) were deducted from the unit values of pooled funds, without the insurer issuing any invoices for the IMFs.

CRA indicated that there was insufficient information to determine whether the deduction of the IMFs represented the payment of charges by the pooled funds (viewed as segregated funds that were deemed to be separate trusts by ETA s. 131) to the insurer (in which event such charges would be subject to GST/HST pursuant to s. 131(1)(c)(i)), or whether the IMFs were merely an element in computing the unit value of the pooled funds, so that they were not consideration for any supply.

However, under either interpretation, the employer was not acquiring investment management services under the policies, nor paid GST/HST on any consideration therefor, so that no input tax credits were available to it.

Neal Armstrong. Summaries of 25 April 2023 GST/HST Ruling 202403 under ETA s. 169(1) and s. 131(1)(c)(i).