Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.
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TO:
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XXXXX
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FROM:
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William Parker
Rulings Officer
Specialty Tax Unit
Excise and GST/HST Rulings Directorate
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CASE NUMBER:
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95869
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DATE:
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November 6, 2007
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SUBJECT:
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XXXXX
Employer Expenses Relating to Pension Plan Trusts and TIB-032R
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Thank you for your request XXXXX concerning the application of GST/HST to supplies made by a corporation to pension plan trusts administered by the corporation and the eligibility of input tax credits (ITCs) by the corporation in respect of the GST/HST paid on the acquired supplies.
All legislative references are to the Excise Tax Act (ETA) and the regulations there under, unless otherwise specified.
Facts
We understand the following to be the facts:
1. XXXXX
2. The employer is the administrator of two single employer pension plans (the "Plans"): XXXXX.
3. As administrator for both of the Plans, the employer pays all of the invoices for the purchases acquired in respect of the Plans. When the employer invoices the appropriate plan trust for the amounts paid, the GST/HST amount is not included on some of the invoices.
4. The GST/HST payable on the supplier invoices paid by the employer is not claimed as an ITC by the employer for the Plans' purchases that are similar to expenses referred to as Plan Trust Expenses in TIB B-032R. The GST/HST payable to the supplier is included in the amounts invoiced to and paid by the plan trusts to the employer.
5. The purchases that are similar to Employer Expenses in TIB B-032R are also invoiced to the plan trusts. The employer never records these expenses as an expense in the employer's general ledger but, nonetheless, claims ITCs on these purchases. The ITCs are claimed once the supplier's invoice is recorded as a receivable from the plan trust. The GST/HST payable to the supplier for these purchases is not invoiced to, or included in the amounts paid by, the plan trusts.
6. Pension plan governing documents were not provided for our review.
REQUEST
1. What is the application of the GST/HST on the "employer expenses" that are subsequently invoiced to the plan trusts?
2. Is the employer entitled to claim ITCs on the supplies of the "employer expenses" acquired by the employer that are subsequently billed to the plan trusts?
REPLY
XXXXX, it is our position that where an employer and plan trust have been consistently following the treatment in TIB B-032R, they may continue to do so. Where parties have not been following the administrative policy set out in the TIB, attempts to do so retroactively are not permitted.
Pursuant to TIB B-032R in determining whether an expense is an employer expense or a plan trust expense, one should first examine the relevant legislation and the plan documents. Where the relevant legislation or the plan documents state that the pension plan trust ultimately bears the costs of all plan expenses (both "plan expenses" and "employer expenses"), all of the expenses would be considered to be plan expenses and none of the expenses would be considered employer expenses for purposes of the TIB. Reciprocally, where legislation or plan documentation states that there are expenses that an employer will bear and not pass on or re-supply to the trust, these expenses would be considered employer expenses as per the TIB. The lists in the TIB are merely examples of the types of expenses that an employer typically may be responsible to bear.
To reiterate, as it seems to be the case here, where plan documents or relevant legislation provide that a plan trust bears all pension plan related costs, there are no employer expenses. This should be confirmed in the relevant legislation or the Plans' documents.
Where it is confirmed that the plan trusts bear all pension plan related costs, the issue is settled because there are no employer costs.
Where the plan trusts do not bear all pension plan related costs, the advantages of TIB B-032R for the treatment of pension plan related costs cannot be applied retroactively.
If you require clarification with respect to any of the issues discussed in this memorandum, please call me at 613-952-8811 or Ken Syer, Manager, Specialty Tax Unit at 613-952-9219.
2007/11/30 — RITS 96023 — XXXXX Cranberry Juice XXXXX
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