28 July 2005 External T.I. 2005-0133491E5 - GST/HST employee and partner rebate

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: Why an employee of a brokerage firm, who earns commissions, would be denied the GST/HST employee rebate on employment expenses

Position: Employees of listed financial institutions, such as brokerage firms, cannot claim the GST/HST employee rebate

Reasons: Section 253 of the Excise Tax Act (the ETA) provides that one of the conditions for an individual to claim the employee GST/HST rebate on employment expenses is that the individual must be an employee of a registrant that is not a listed financial institution. Subsection 123(1) and subparagraph 149(1)(a)(iii) of the ETA define a "listed financial institution" to include a person whose main business activity is as trader or dealer in, or as a broker or salesperson of, financial instruments or money. A brokerage firm would generally fit that definition.

XXXXXXXXXX 2005-013349
Patricia Taylor
July 28, 2005

Dear XXXXXXXXXX:

Subject: GST/HST employee and partner rebate

We are writing in response to your letter dated May 24, 2005, concerning the GST/HST rebate available to an employee.

You question why your client, an employee of XXXXXXXXXX earning solely commission income, would be denied the GST/HST employee rebate on his expenses due to the fact that the employer, XXXXXXXXXX, is a listed financial institution. Your view is that XXXXXXXXXX is a not a listed financial institution since it is not "a corporation whose principal business is the lending of money".

Our Comments

Section 253 of the Excise Tax Act (the ETA) provides a rebate to employees and members of partnerships in respect of the GST/HST paid on certain employment or partnership related expenses where various conditions are met. One of these conditions is that in order for an individual who is an employee to be eligible for the rebate, the individual must be an employee of a registrant that is not a listed financial institution.

Generally, a listed financial institution is a provider of financial services. Specifically, as a result of the definition of "listed financial institution" in subsection 123(1) and paragraph 149(1)(a) of the ETA, a person is a listed financial institution throughout a particular taxation year if, at any time in the particular year, the person is included in one of the following categories:

i. a bank;

ii. a corporation that is licensed or otherwise authorized under the laws of Canada or a province to carry on in Canada the business of offering to the public its services as a trustee;

iii. a person whose principal business is as a trader or dealer in, or as a broker or salesperson of, financial instruments or money;

iv. a credit union;

v. an insurer or any other person whose principal business is providing insurance under insurance policies;

vi. a segregated fund of an insurer;

vii. the Canada Deposit Insurance Corporation;

viii.a person whose principal business is the lending of money or the purchasing of debt securities or a combination thereof;

ix. an investment plan;

x. a person providing services as a tax discounter; or

xi. a corporation deemed under section 151of the ETA (i.e., corporations that have made an election under section 150) to be a financial institution.

It is our opinion that a brokerage company, such as XXXXXXXXXX, would fit in the category listed in (iii) above, as a person whose main business activity is as trader or dealer in, or as a broker or salesperson of, financial instruments or money. Therefore, brokerage companies would generally be considered listed financial institutions, and consequently, their employees would not be entitled to claim the employee GST/HST rebate.

We trust our comments will be of assistance to you.

Yours truly,

Phil Jolie
Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch