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'."
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Excise Tax Act - Regulations - Selected Listed Financial Institutions Attribution Method (GST/HST) Regulations - Draft section 11 | 17 |
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) | 50 |
Subsection 172.1(5)
Administrative Policy
GST/HST Technical Information Bulletin B-032 “Expenses Related to Pension Plans” 17 November 2015
CRA seemed to consider that where an employer retains an investment manager for the company pension plan, and the pension plan pays the manager directly, CRA considers there to be a double supply of a service from the manager to the employer, and by the employer to the plan
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.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Recipient | 349 | |
| Tax Topics - Excise Tax Act - Section 169 - Subsection 169(1) | investment management services provided to a pension plan viewed as supplied to the employer, and on-supplied to the plan | 74 |
27 November 2013 GST/HST Interpretation 152148 - New GST/HST rules on deemed supplies of property and services to pension entities
Before discussing the consequences of the employer paying a third party to manage and administer the employer's registered pension plan and then charging the pension entity for those services, CRA stated:
We first wish to confirm that the employer would be considered to have made an actual supply to the pension entity in all three of the above circumstances. Pursuant to ... B-032 ... where pension related expenses incurred by the employer (i.e., the person liable to pay the consideration under the agreement for the supply) have been paid for out of trust assets because of the following situations, the CRA generally considers the payment made by the plan trust to be consideration for a supply of property or services made by the employer to the plan trust:
* the plan trust paid the third party supplier directly,
* the employer invoiced the plan trust for the costs of the inputs, and/or
* the plan trust reimbursed the employer.In such circumstances, the employer would generally be considered to be making a supply of property or services to the plan trust. If the employer is a GST/HST registrant, it would be required to charge, collect and remit GST/HST on the supply to the plan trust where the supply is not exempt. However, the employer would be entitled to claim an input tax credit ("ITC") in respect of the acquisition or importation of the property or service being acquired or imported for supply to the plan trust, provided that all of the conditions of section 169 are met.
22 December 2011 Ruling Case No. 119214
General discussion.
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| Tax Topics - Excise Tax Act - Section 261.01 | 4 |
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 source deducitons and similar calculations and remittances in respect of the pension plan) to employers, then the employer would not be required to recognize a "specified resource" if these services were a single supply.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Excise Tax Act - Section 172.1 - Subsection 172.1(1) - Pension activity | 420 |
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.
Articles
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)
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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).
Subsection 172.1(9)
Administrative Policy
GST/HST Technical Information Bulletin B-108, Changes to GST/HST Rules for Pension Plans – New Section 157 and Amendments to Section 172.1, 5 February 2014
Overview of Element A in the A/(B-C) formula
Element A
The amounts to be included in element A are described in subsection 172.1(9) in paragraphs (a) through (f) of that element. These amounts essentially consist of the GST or the federal part of the HST that the particular participating employer and any other participating employers that are related to the particular participating employer are required to account for under paragraphs 172.1(5)(c), (6)(c) and (7)(c) in their preceding fiscal year. These amounts are calculated with reference to the federal part of the deemed tax collected as represented by element A in each of paragraphs 172.1(5)(c), 6(c) and 7(c) and referred to below as "federal amounts". An explanation of the calculation of deemed tax collected is included in sections 1, 2 and 3 of Part IV of GST/HST Notice 257, The GST/HST Rebate for Pension Entities.
An employer that was a selected qualifying employer or a qualifying employer (explained later in this bulletin) in the preceding fiscal year (and thus relieved from accounting for tax under the deemed taxable supply rules in that year) must also include in the calculation any amounts that would have been included in element A had the employer not been a selected qualifying employer or a qualifying employer in that year. …
Overview of Element B in the A/(B-C) formula
Element B
The amounts to be included in element B are described in subsection 172.1(9) in paragraphs (a) through (c) of that element. These amounts essentially consist of the GST and the federal part of the HST that the pension entities of the pension plan actually paid or were deemed to have paid under section 172.1, as well as certain amounts that must be added to the net tax of a pension entity when it receives a TAN from the employer. An explanation on TANs is included in Part V of GST/HST Notice 257, The GST/HST Rebate for Pension Entities. …
Overview of Element C in the A/(B-C) formula
Element C
The amounts to be included in element C are described in subsection 172.1(9) in paragraphs (a) and (b) of that element. These amounts essentially consist of the following:
- The federal amount of a TAN issued under either subsection 232.01(3) or 232.02(2) by any participating employer of the pension plan to a pension entity of the plan during a fiscal year of the pension entity that ends in the preceding fiscal year of the particular participating employer. This amount is represented by paragraph (a) in subsection 232.01(4) or 232.02(3), respectively.
- The federal component of a "recoverable amount" (as defined in subsection 261.01(1)) of all pension entities of the pension plan for each entity's claim period ending in a fiscal year of the pension entity that ends in the preceding fiscal year of the particular participating employer. The federal component is calculated with reference to amounts determined for element A under subsections 172.1(5), (6) and (7) for deemed tax paid by the pension entity for purposes of section 261.01.