Section 172.1

Subsection 172.1(1)

Pension activity

Administrative Policy

19 October 2011 Interpretation Case No. 133414

Various adminsitrative services are provided by employers to various pension plans (which are adminstered by Corporation A), including preparing and submitting payroll contributions, remitting monthly contributions, distributing annual pension adjustment amounts and providing enrolment information information, constituted "pension activities." In response to a question as to whether the employers would be required to calulate and remit GST/HST even though the employer resources utilized in performing these tasks were immaterial, CRA indicated that the employers would be deemed under s. 172.1(6) or (7) to collect tax on the fair market value of these "employer resources." However, CRA stated that "we understand that the Department of Finance is currently examining issue of materiality with respect to the scope of the application of 'employer resources'."

19 October 2011 Interpretation Case No. 130384

With respect to various services provided by participating employers of registered pension plans, CRA first noted that:

For purposes of subsection 172.1(6) and (7), an "employer resource" is essentially anything acquired, created, developed and/or produced by the employer including the employee labour and overhead required to do these things.

CRA then stated:

In our view, the following items listed in your submission would be related to the establishment, management or administration of the pension plan or a pension entity of the pension plan and would not qualify as an "excluded activity". We consider each of these items to be in respect of a "pension activity" to which section 172.1 would apply.

  • Services pertaining to the establishment or subsequent amendment of a pension plan or plan trust.
  • The preparation and filing of actuarial reports, financial reports and other information for a pension plan pursuant to statutory requirements.
  • Administration services in relation to the collection of pension contributions and payment of pension benefits.
  • The reconciliation of pension contributions to payroll records.
  • The maintenance of records pertaining to employee hires, terminations and deaths.
  • Pension benefit calculations.
  • Pension adjustment calculations.
  • Preparation of a pension entity's periodic pension rebate application forms (GST4607) and SLFI returns (GST/HST 494).
  • Trustee services rendered by the employer or by third parties contracted by the employer.
  • The retention of a trustee for a plan trust.
  • Custodial or nominee services for plan trust assets.
  • The appraisal of plan trust investment performance.
  • The appointment of an investment manager for a plan trust.
  • Plan trust portfolio management.
  • Investment advice with respect to plan trust assets.
  • Salaries or wages paid to employees who invest or manage funds for a pension entity.
  • Brokerage, agents' charges and all other property or services relating to the acquisition, utilization or disposal of plan trust assets.
  • Legal, accounting or auditing services rendered in respect of plan trust assets.

Conversely, we do not consider the following items listed in your submission to be in respect of a "pension activity". Accordingly, these would not be subject to the deeming rules of section 172.1.

  • Third party accounting services supplied to an employer to determine the employer's obligations under section 172.1 of the ETA (i.e., with respect to deemed taxable supplies and the corresponding deemed tax collected).
  • In the case of a hostile takeover of an employer, actuarial services and the preparation of an actuarial report to determine the liabilities of a pension plan, for the sole purpose of assessing the related financial impact on the assets and liabilities of a participating employer of the plan.
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Tax Topics - Excise Tax Act - Section 172.1 - Subsection 172.1(5) 48

Subsection 172.1(5)

Administrative Policy

22 December 2011 Ruling Case No. 119214

General discussion.

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Tax Topics - Excise Tax Act - Section 261.01 2

13 December 2011 Interpretation Case No 130278

In response to a question as to whether the direct cost exemption for pubic service bodies in Sched. V, Part V.1, s. 5.1 or Part VI, s. 6 "overrides" the deemed supply rule in s. 172.1(5), CRA stated that

Notwithstanding that the actual supply of the specified resource may be an exempt supply, for the purposes of subsection 172.1(5), the public service bod is deemed to have made a taxable supply of the specified resource….

19 October 2011 Interpretation Case No. 130384

Where a third party provides payroll services (i.e., the calculation and remittance of sourcde deducitons and similar calculations and remittances in repsect of the pension plan) to employers, then the employer would not be reuired to recognize a "specified resource" if these services were a single supply.

Subsection 172.1(7)

Administrative Policy

21 October 2011 Interpretation Case No. 130205

As s. 172.1 only applies to a registrant, it did not apply to an unregistered charity.


Brent F. Murray, "Pension Plans: A Step-by-Step Guide for complying with GST/HST Obligations", Canadian GST/HST Monitor, July 2014, Vol. 310, p.1

Deemed supply of untraced employer resource (p.2)
  • Subsection 172.1(7) is a catch-all provision that covers situations where a participating employer of a pension plan acquires, consumes or uses an employer resource in the course of pension activities, but not for purposes of making a supply of property or services to the pension entity, deeming the employer to have nevertheless made a taxable supply of the "employer resource" and to have collected GST.

When the deemed supply rules apply, the employer is deemed to have collected GST/HST on the last day of the employer's fiscal year on the fair market value of the supply. The application of the deemed supply rules will require the employer to analyze the "employer resources" that were consumed or used in pension activities on a yearly basis. This typically involves an analysis of salary costs, overhead costs and any other relevant costs that relate to pension activities which were not supplied to the plan. The analysis will need to be further broken down where such activities relate to more than one pension plan (i.e., a component of the deemed supply should be properly allocated to each respective pension plan).

Calculation of provincial factor (p. 3)

Where the participating employer did not make pension contributions to the pension plan in the fiscal year, the provincial factor is determined by reference to the residency of the employees who are active members of the pension plan. Accordingly, in order for an employer to comply with the deemed supply rules, there are a number of calculations that need to be completed by fiscal year end including (i) quantifying the value of deemed supplies; and (ii) calculating the pension plan's "provincial factor" which requires the employer to know the amount of pension contributions that were made during the year in relation to employees on a province-by-province basis.

Subsection 172.1(8)

Administrative Policy

Notice No. 280 "Section 172.1 Information Requirements" January 2013

"For purposes of subsection 172.1(8), an employer is required to provide the following information concerning a deemed supply of a specified resource made under subsection 172.1(5):

  • the name of the employer and business number...;
  • the name of the pension entity and corresponding pension plan number;
  • the total federal part of the tax deemed collected by the employer in respect of deemed taxable supplies during the fiscal year;
  • the total provincial part of the tax deemed collected by the employer in respect of deemed taxable supplies during the fiscal year; and
  • a statement by the employer certifying that it included the tax deemed collected in its net tax for its reporting period that includes the last day of that fiscal year.

Although subsection 172.1(5) treats each specified resource or part as a separate deemed supply, it is not necessary for an employer to provide information in respect of each separate deemed supply....However, where the actual supply of the specified resource or part was acquired by the pension entity for consumption, use or supply in the commercial activities of the pension entity, the employer must provide sufficient information to enable the pension entity to claim an ITC... ."

Similar information requirements are specified by CRA for supplies of employer resources under ss. 172.1(6) and (7).