Subsection 225.4(3)
Paragraph 225.4(3)(b)
Administrative Policy
B-107 "Investment Plans (Including Segregated Funds of an Insurer) and the HST" April 2013
No zero-rating for supplies to NR unitholders if do not make election
For example, where a mutual fund trust, that has not entered into an election to exclude non-residents from the calculation of its provincial attribution percentage, makes a supply of a financial service that would otherwise be described in section 1 of Part IX of Schedule VI to the Act to a unit holder of a series of a stratified investment plan of the mutual fund that is a non-resident, it is not allowed to claim ITCs on inputs that relate to this supply (i.e., the zero-rating provisions referred to in Part IX of Schedule VI of the Act would not apply because the deeming provision would result in the supply being made to a resident and, as a result, the supply would be exempt).
Subsection 225.4(6)
Administrative Policy
Guide RC4050 "GST/HST Information for Selected Listed Financial Institutions" 2011
Method for investor percentages must be fair and reasoanble
For purposes of determining provincial attribution percentages for a stratified or non-stratified investment plan, units held by non-residents would be treated as units held by residents of Canada in non-participating provinces, unless an election is in effect under proposed subsection 225.4(6) or (7) of the ETA (which is made using Form RC4610) to opt out of this deemed resident rule. This deemed resident rule or the election to opt out of the deemed resident rule would also apply to non-resident plan members of pension entities and private investment plans.
Only investment plans are required to report the percentage for non-residents deemed by proposed section 225.4 of the ETA to be residents. The method used to calculate this percentage should be fair and reasonable and generally used consistently by the investment plan.
In the case of consolidated filing, the percentages reported on Schedule A under each column would represent aggregated percentages determined for each series/fund. ...
Effect of election
Provincial attribution percentages
... Unless an election is in effect under proposed subsection 225.4(6) or (7) of the ETA (using Form RC4610), the units held by non-residents in an investment plan would be treated as units held by residents of Canada but not residents of any participating province.
Forms
RC4610 “GST/HST Election or Revocation of an Election to Have Subsection 225.4(3), (4) or (5) Not Apply to a Selected Listed Financial Institution”
Making of election to exclude non-resident units under SAM formula
Effect of these elections
Stratified investment plan
In very general terms, under subsection 225.4(3) of the ETA, where units of a series of an SLFI stratified investment plan are held by individuals or specified investors, or units of an exchange-traded series are held by persons and the plan knows that these units are held by non-residents of Canada, these units of the particular series held by the non-residents are treated as being held by residents of Canada. Subsection 225.4(3) applies for various purposes such as for the purposes of the Selected Listed Financial Institutions Attribution Method (GST/HST) Regulations (SLFI Regulations), for the purpose of determining input tax credits of the investment plan and for the purposes of certain provisions applicable to a qualifying taxpayer (as defined in section 217.1).
By making an election under subsection 225.4(6) of the ETA for a series of the stratified investment plan, subsection 225.4(3) of the ETA will not apply to the series. For example, one of the results of making the election is that the units of the series held by a non-resident person that is an individual or specified investor, or units of an exchange-traded series held by a non-resident person would not be deemed to be held by an individual resident in Canada that is not resident in any participating province for the purpose of the SLFI Regulations and would continue to be considered units held by a non-resident of Canada.
Articles
PWC, "Tax Insights: Investment limited partnerships ─ GST/HST & QST filing obligations", Issue 2020-27, May 04, 2020
Addition of ILPs to SLFI world
Most Canadian resident investment limited partnerships (ILPs) will be considered to be a Selected Listed Financial Institution (SLFI), starting January 1, 2019 (i.e. the 2019 fiscal year). This will require the ILP to adjust its GST/HST and QST liabilities for the 2019 fiscal year by filing a SLFI return by June 30, 2020.
Desirability of an investment limited partnership (or other SLFI) making a s. 225.4(6) (or (7)) election so as to avoid ITC denials under s. 225.4(3)(d) for non-exclusive inputs incurred re Sched. VI, Pt. IX, s. 1 or s. 186 commercial activity
Although most ILPs do not make taxable supplies on which they collect and remit GST/HST, an ILP may undertake certain activities which allow it to claim ITCs, including making zero-rated supplies of financial services to non‑residents or, pursuant to proposed amendments to section 186 of the ETA, holding shares or debt in related corporations whose property (all or substantially all) was last acquired for use exclusively in a commercial activity. As deeming rules may preclude an ILP from claiming ITCs on expenses that are not being incurred exclusively in a commercial activity, an ILP should also consider filing certain elections under section 225.4 of the ETA.
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| Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Investment Limited Partnership | 170 |