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XXXXX
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File: 11585-32
RITS: HQR0000280
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October 28, 1996
Dear Sir:
This is in reply to your letter of September 12, 1996 wherein you indicate that "Revenue Canada will not allow one company in a multi-employer pension plan to claim the GST input tax credits (ITCs) in respect of eligible 'Employer Expenses' incurred by the pension plan, even where the group consists of related companies", and that this does not seem fair "particularly where all of the employers are part of a related group that are otherwise allowed to nil elect under section 156 of the Excise Tax Act (the "Act") with respect to transactions among themselves".
Your Requests:
Specifically, you request that administrative relief be provided in the case of your plan (a group accident and sickness plan) so that one employer can claim the ITCs with respect to eligible "Employer Expenses". You also request confirmation that "either the employer does not have to levy GST on administrative charges billed to the pension plan that would be eligible 'Employer Expenses' or if it does that the same employer can claim back an ITC on these charges."
Our Comments:
As stated in our previous letter to you, the Department's administrative position on input tax credit entitlement described in TIB B-032R applies specifically to single employer pension plans only. There is no legislative authority to extend this position to either multi-employer pension plans or to any other employee benefit plans such as a "group accident and sickness plan".
In a multi-employer pension plan that is established pursuant to one or more collective agreements, a board of trustees or other similar body constituted in accordance with the terms of the pension agreement or the collective agreement is the "administrator" of the plan. In the case of any other multi-employer plan, a pension committee constituted in accordance with the terms of the plan is the "administrator" (see subsection 7(1) of the Pension Benefits Standards Act, 1985). In both cases, the administrator (a separate person for GST purposes) will be responsible for the administration of the plan. The sponsors/employers are only required to make periodic pension contributions to the plan, they are not required to administer the plan. Hence, if an employer of a multi-employer pension plan is invoiced for expenses relating to the administration of the plan (the "Employer Expenses"), the employer cannot be said to have acquired the related property or services for use in the course of its commercial activities, and no ITC's can be claimed by the employer in respect of the Employer Expenses. If the employer "re-supplies" these "Employer Expenses" to the board of trustees and charges tax on the re-supply, the employer may be said to have acquired the related property or services for re-supply (to the board of trustees) in the course of its commercial activities, and may claim the appropriate input tax credit in accordance with the rules of section 169 of the Act. In the situation where the employers of the plan are members of a closely related group, subsection 156(2) of the Act will not apply to the re-supply of the Employer Expenses by the employer since: i) the re-supply is not acquired by the board of trustees for consumption, use or supply exclusively in the course of its commercial activities and ii) the board of trustees is not a corporation and is not a member of a "closely related group" under the Act.
Further, it is also our view that, where an employer/sponsor of a multi-employer pension plan provides in-house taxable services to the board of trustees, the provision of these services constitutes the making of a taxable supply by the employer to another person, and tax must be charged in accordance with the provisions of subsection 165(1) of the Act. Again, Section 156 will not apply to allow the "nil consideration" election, notwithstanding that all employers/sponsors of the plan are members of a "closely related group".
In the cases of other employee benefit plans (e.g. a group accident and sickness plan), the Department's position in TIB B-[0]32R will not apply. It is our position that these plans are established by the employer to provide "benefit payments" (payment of money) to the plan members, which is a supply of a financial service pursuant to subsection 123(1) of the Act. Accordingly, if an employer is invoiced and pays an amount for services relating to the administration of the plans, the employer cannot be said to have acquired those services for consumption or use in the course of its commercial activities, and no related ITC can be claimed by the employer.
We trust our comments will be of assistance.
Yours truly,
P. Tang
Policy Officer
Financial Institutions and Real Property Division
GST Rulings & Interpretations Directorate
Telephone #: (613) 954-8585
Fax #: (613) 990-1233
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