Section 232.02

Issuance of tax adjustment notes (p.3)

[W]here the employer directs the pension plan to pay a particular expense or the employer recharges an expense to the pension plan, GST/HST should be charged and collected by the employer and separately remitted. To eliminate double taxation, sections 232.01 and 232.02 enable the participating employer to issue a "TAN", in prescribed form and containing prescribed information, with respect to a deemed supply of a "specified resource" under subsection 172.1(5) and a deemed supply of an "employer resource" under subsection 172.1(6). On issuance of the TAN, the participating employer is entitled to take a net tax deduction equal to the amount specified in the TAN for the reporting period in which the TAN was issued. The amount of the TAN is generally equal to the lesser of (i) the amount of deemed tax paid under section 172.1; and (ii) the actual amount of tax that became payable under section 165. Given that the employer can only take the net tax adjustment when the TAN is issued, it is beneficial for the employer to issue the TAN prior to its fiscal year end so as to offset its remittance obligations.

Avoidance of TAN procedure (p. 3)

Given the complexities that are associated with TANs, newly enacted section 157 of the ETA allows the employer and the pension plan to make an election (Form RC4615) to deem every taxable supply that is made by the employer to the pension plan to be made for no consideration. Making this election eliminates the double taxation issue and, as such, eliminates the requirement for employers to issue TANs…