Employer incurring consideration for third-party supplier of pension plan services
An expense, including a pension-related expense, is incurred by an employer where the employer is liable to pay consideration to a third party supplier under an agreement for a supply.
Where a pension-related expense incurred by an employer has been paid for out of plan trust assets, the CRA generally considers the amount of the payment made by the plan trust to be consideration for a supply of property or a service made by the employer to the plan trust where any of the following occurs:
- the plan trust paid the third party supplier directly,
- the employer invoiced the plan trust for the expense,
- the plan trust reimbursed the employer.
…Example
An employer who is a GST/HST registrant provides a pension plan for its employees. The employer enters into an agreement with a third party (investment manager) to provide taxable investment management services in relation to the assets of the plan. The employer is liable to pay the consideration under the agreement with the investment manager and is the recipient of the taxable supply. The employer forwards the invoice from the investment manager to the plan trust, which pays the amount stated on the invoice directly to the investment manager. Since the pension-related expense incurred by the employer (i.e., the person liable to pay the consideration under the agreement for the supply) has been paid for out of the pension plan trust assets, the payment by the plan trust is consideration for a taxable supply of an investment management service made by the employer to the plan trust. …
[T]he employer is entitled to claim an ITC in respect of the tax payable to the investment manager to the extent the investment management service is acquired for supply to the plan trust in the course of the employer’s commercial activities, provided that all of the conditions of section 169… are met.
