Regulations Amending Various GST/HST Regulations, No. 11: SOR/2019-59

Canada Gazette, Part II, Volume 153, Number 6

Registration
SOR/2019-59 March 4, 2019

EXCISE TAX ACT

P.C. 2019-130 February 28, 2019

Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to subsection 225.2(9) footnote a and sections 277 footnote b and 277.1 footnote c of the Excise Tax Act footnote d, makes the annexed Regulations Amending Various GST/HST Regulations, No. 11.

Regulations Amending Various GST/HST Regulations, No. 11

PART 1

Artists’ Representatives (GST/HST) Regulations

1 The schedule to the Artists’ Representatives (GST/HST) Regulations footnote 1 is amended by striking out the following:

Audio Video Licensing Agency (AVLA)

2 The schedule to the Regulations is amended by adding the following in alphabetical order:

Connect Music Licensing Service Inc.

PART 2

Financial Services and Financial Institutions (GST/HST) Regulations

3 The heading before section 2 of the French version of the Financial Services and Financial Institutions (GST/HST) Regulations footnote 2 is replaced by the following:

Définitions et interprétation

4 Section 2 of the Regulations is replaced by the following:

2 (1) In these Regulations, Act means the Excise Tax Act.

(2) In these Regulations, the expressions employee life and health trust, registered disability savings plan, registered education savings plan, registered retirement income fund, registered retirement savings plan and TFSA have the same meanings as in subsection 248(1) of the Income Tax Act.

5 (1) Subsection 3.1(1) of the Regulations is repealed.

(2) Paragraph 3.1(2)(c) of the Regulations is replaced by the following:

6 The Regulations are amended by adding the following after section 4:

Prescribed Person for Paragraph 149(5)(g) of the Act

4.1 For the purposes of paragraph 149(5)(g) of the Act, an employee life and health trust is a prescribed person.

PART 3

Games of Chance (GST/HST) Regulations

7 Paragraph (a) of the definition fourniture de promotion in subsection 5(1) of the French version of the Games of Chance (GST/HST) Regulations footnote 3 is replaced by the following:

PART 4

Amalgamations and Windings-Up Continuation (GST/HST) Regulations

8 The schedule to the Amalgamations and Windings-Up Continuation (GST/HST) Regulations footnote 4 is amended by adding the following in numerical order:

Section 273.2

PART 5

Offset of Taxes (GST/HST) Regulations

9 Section 3 of the Offset of Taxes (GST/HST) Regulations footnote 5 is replaced by the following:

3 These Regulations apply in respect of the tax required to be remitted under subsection 228(2) or (2.3) of the Act or paid under subsection 228(4) or Division IV or IV.1 of Part IX of the Act.

10 (1) Paragraph 5(e) of the Regulations is replaced by the following:

(2) Paragraph 5(i) of the Regulations is replaced by the following:

11 (1) The portion of paragraph 6(e) of the Regulations before subparagraph (ii) is replaced by the following:

(2) The portion of subparagraph 6(e)(ii) of the Regulations before clause (A) is replaced by the following:

(3) The portion of subparagraph 6(e)(iii) of the Regulations before clause (A) is replaced by the following:

PART 6

Streamlined Accounting (GST/HST) Regulations

12 Subsection 24(4) of the French version of the Streamlined Accounting (GST/HST) Regulations footnote 6 is replaced by the following:

(4) Pour déterminer un montant en conformité avec la partie IV du présent règlement, sauf un montant de taxe nette qui, aux termes de ce règlement, est à déterminer en conformité avec le paragraphe 225(1) de la Loi, l’inscrit qui effectue, à un moment où un choix qu’il a fait est en vigueur, la fourniture taxable d’un bien ou d’un service au profit d’une personne avec laquelle il a un lien de dépendance, sans contrepartie ou pour une contrepartie inférieure à la juste valeur marchande du bien ou du service à ce moment, est réputé avoir effectué la fourniture pour une contrepartie, payée à ce moment, égale à cette juste valeur marchande; la taxe calculée sur cette contrepartie est réputée devenir percevable, et être perçue, à ce moment.

PART 7

Selected Listed Financial Institutions Attribution Method (GST/HST) Regulations

13 (1) The definition investment plan in subsection 1(1) of the Selected Listed Financial Institutions Attribution Method (GST/HST) Regulations footnote 7 is replaced by the following:

investment plan means a person referred to in subparagraph 149(1)(a)(vi) or (ix) of the Act, other than

(2) The definition specified resource in subsection 1(1) of the Regulations is replaced by the following:

specified resource has the same meaning as in subsection 172.1(1) of the Act. (ressource déterminée)

(3) Paragraph (h) of the definition distributed investment plan in subsection 1(1) of the Regulations is replaced by the following:

(4) Paragraph (c) of the definition plan member in subsection 1(1) of the Regulations is replaced by the following:

(5) Subsection 1(1) of the Regulations is amended by adding the following in alphabetical order:

subscriber under a registered education savings plan has the same meaning as in subsection 146.1(1) of the Income Tax Act. (souscripteur)

14 The portion of paragraph 3(a) of the Regulations before subparagraph (i) is replaced by the following:

15 Paragraph (b) of the description of A in subsection 7(1) of the Regulations is replaced by the following:

16 Section 8 of the Regulations is repealed.

17 Paragraph 24(1)(c) of the French version of the Regulations is replaced by the following:

18 The heading before section 25 of the Regulations is replaced by the following:

Banks and Credit Unions

19 The portion of subsection 25(1) of the Regulations before paragraph (a) is replaced by the following:

Determination of percentage

25 (1) If a selected listed financial institution is a bank or a credit union, the financial institution’s percentage for a particular period and for a participating province in which the financial institution has a permanent establishment is 1/5 of the total of

20 (1) The portion of subsection 35(1) of the Regulations before paragraph (a) is replaced by the following:

Percentage — defined contribution plans, profit sharing plans, RESPs and retirement compensation arrangements

35 (1) If a selected listed financial institution is, in a particular period in which a fiscal year of the financial institution ends, an investment plan and a pension entity of a particular defined contribution pension plan (other than a pension entity described in section 38) or a private investment plan that is a trust governed by a particular deferred profit sharing plan, a particular employees profit sharing plan, a particular registered education savings plan or a particular retirement compensation arrangement, the financial institution’s percentage for a participating province and for the particular period is

(2) The portion of subsection 35(2) of the Regulations before paragraph (a) is replaced by the following:

Attribution of plan members to a participating province

(2) For the purposes of subsection (1), if a selected listed financial institution is a pension entity of a particular pension plan or is a private investment plan that is a trust governed by a particular deferred profit sharing plan, a particular employees profit sharing plan, a particular registered education savings plan or a particular retirement compensation arrangement and if, for any attribution point in respect of the financial institution for a particular period in which a fiscal year of the financial institution ends, the total of all amounts — each of which is the total value, on the attribution point, of the assets of the particular plan or arrangement that are reasonably attributable to a plan member (in this subsection referred to as a “known member”) of the financial institution in respect of which the financial institution knows, on December 31 of the calendar year in which the fiscal year ends, whether or not the plan member is resident in Canada on the attribution point and, in the case of plan members resident in Canada, the province in which the plan member is resident on the attribution point — is less than 50% of the total value, on the attribution point, of the assets of the particular plan or particular arrangement, the following rules apply:

21 (1) Subparagraph (v) of the description of G1 in paragraph 46(a) of the Regulations is replaced by the following:

(2) Clauses (vi)(A) and (B) of the description of G1 in paragraph 46(a) of the Regulations are replaced by the following:

(3) The description of G2 in paragraph 46(a) of the Regulations is amended by adding the following after subparagraph (iii):

(4) Subparagraph (vi) of the description of G2 in paragraph 46(a) of the Regulations is replaced by the following:

(5) Clauses (iii)(C) and (D) of the description of G3 in paragraph 46(a) of the Regulations are replaced by the following:

(6) Subparagraph (iv) of the description of G7 in paragraph 46(b) of the Regulations is replaced by the following:

(7) Subparagraph (ii) of the description of G8 in paragraph 46(b) of the Regulations is replaced by the following:

(8) Subparagraphs (iii) and (iv) of the description of G12 in paragraph 46(b) of the Regulations are replaced by the following:

(9) Clause (C) of the description of A in subparagraph (i) of the description of G19 in paragraph 46(d) of the Regulations is replaced by the following:

(10) Clause (C) of the description of A in subparagraph (i) of the description of G19 in paragraph 46(d) of the Regulations, as enacted by subsection (9), is replaced by the following:

(11) Subclause (I) of the description of D in subparagraph (iii) of the description of G21 in paragraph 46(d) of the Regulations is replaced by the following:

(12) The description of E in subclause (II) of the description of D in subparagraph (iii) of the description of G21 in paragraph 46(d) of the Regulations is replaced by the following:

(13) Clause (B) of the description of A in subparagraph (iii) of the description of G21 in paragraph 46(d) of the Regulations is replaced by the following:

22 (1) Subparagraph (iii) of the description of A1 in subsection 48(1) of the Regulations is replaced by the following:

(2) Subparagraph (iii) of the description of A1 in subsection 48(1) of the Regulations, as enacted by subsection (1), is replaced by the following:

(iii) all amounts each of which is an amount — in respect of a supply of property or a service that is made on the particular day by another person to the financial institution and to which an election made by the financial institution under subsection (4) applies — equal to tax calculated at the rate set out in subsection 165(1) on the cost to the other person of supplying the property or service to the financial institution excluding any remuneration to employees of the other person, the cost of financial services and tax under this Part, to the extent that the property or service was acquired for consumption, use or supply in the course of the activities relating to the series, as determined under section 51 of those Regulations,

(3) Subparagraph (iii) of the description of A4 in subsection 48(1) of the Regulations is replaced by the following:

(4) Subparagraph (iii) of the description of A4 in subsection 48(1) of the Regulations, as enacted by subsection (3), is replaced by the following:

(5) Paragraph (b) of the description of D in subsection 48(1) of the Regulations is replaced by the following:

(6) Paragraph (c) of the description of A1 in subsection 48(2) of the Regulations is replaced by the following:

(7) Paragraph (c) of the description of A1 in subsection 48(2) of the Regulations, as enacted by subsection (6), is replaced by the following:

(8) Paragraph (b) of the description of D in subsection 48(2) of the Regulations is replaced by the following:

23 Paragraph 52(2)(b) of the Regulations is replaced by the following:

24 The Regulations are amended by adding the following after section 70:

Investment plans — paragraph 149(1)(o.2) of Income Tax Act

70.1 If an investment plan is a corporation (other than a pension entity) that is exempt from tax under the Income Tax Act by reason of paragraph 149(1)(o.2) of that Act and if, for a reporting period of the investment plan throughout which the investment plan was a selected listed financial institution and for which a return was filed on or after July 1, 2010 but before May 8, 2013, the investment plan reported in the return for the reporting period an amount on account of net tax that was determined as though section 23 applied in respect of the reporting period, the investment plan may elect in prescribed form containing prescribed information to have that section apply, and to have paragraph 3(e) and sections 29 to 34 not apply, in respect of all reporting periods of the investment plan for which a return was filed on or after July 1, 2010 but before May 8, 2013.

PART 8

New Harmonized Value-added Tax System Regulations

25 (1) Section 58.59 of the New Harmonized Value-added Tax System Regulations footnote 8 is amended by adding the following after subsection (1):

Adaptation — paragraph 172.1(5.1)(c) of Act

(1.1) If a person acquires at any time property or a service for the purpose of making a supply of all or part of the property or service to a master pension entity for consumption, use or supply by the master pension entity in the course of pension activities in respect of any pension plan that is in the master pension group in respect of the person and the master pension entity at that time and if the acquisition is not for the purpose of making a supply after September 2016 of any part of the property or service to a master pension entity for consumption, use or supply by the master pension entity in the course of pension activities in respect of any pension plan that is in the master pension group in respect of the person and the master pension entity at that time, then, for the purposes of determining the value for B in paragraph 172.1(5.1)(c) of the Act, the amount for Prince Edward Island in respect of a taxable supply of all or part of the property or service deemed to have been made under paragraph 172.1(5.1)(a) of the Act is determined by adapting the description of G in paragraph 172.1(5.1)(c) of the Act to read as follows:

(2) Section 58.59 of the Regulations is amended by adding the following after subsection (2):

Adaptation — paragraph 172.1(6.1)(c) of Act

(3) In respect of a fiscal year of a person that includes October 1, 2016, for the purposes of determining the value for B in paragraph 172.1(6.1)(c) of the Act, the amount for Prince Edward Island is determined by adapting the description of G in paragraph 172.1(6.1)(c) of the Act to read as follows:

Adaptation — paragraph 172.1(7.1)(c) of Act

(4) In respect of a fiscal year of a person that includes October 1, 2016, for the purposes of determining the value for B in paragraph 172.1(7.1)(c) of the Act, the amount for Prince Edward Island is determined by adapting the description of G in paragraph 172.1(7.1)(c) of the Act to read as follows:

PART 9

New Harmonized Value-added Tax System Regulations, No. 2

26 The heading before section 1 of the French version of the New Harmonized Value-added Tax System Regulations, No. 2 footnote 9 is replaced by the following:

Définitions et interprétation

27 (1) The definition provincial investment plan in section 1 of the Regulations is replaced by the following:

provincial investment plan for a particular province at any time means an investment plan

(2) Section 1 of the Regulations is amended by adding the following in alphabetical order:

imported taxable supply has the same meaning as in section 217 of the Act. (fourniture taxable importée)

provincial stratified investment plan means a stratified investment plan (other than a provincial investment plan) with one or more provincial series. (régime de placement stratifié provincial)

series has the same meaning as in subsection 1(1) of the Selected Listed Financial Institutions Attribution Method (GST/HST) Regulations. (série)

(3) Section 1 of the Regulations is renumbered as subsection 1(1) and is amended by adding the following after subsection (1):

Application of definitions to adaptations

(2) For greater certainty, the definitions in this section apply in subsections 218.1(1) and (1.2), 220.07(1) to (4) and 220.08(1) of the Act as adapted by these Regulations.

28 Subsections 2(3) and (4) of the Regulations are repealed.

29 Sections 7 to 7.02 of the Regulations are replaced by the following:

Prescribed extent — paragraph 218.1(1)(a) of Act

7 For the purposes of paragraph 218.1(1)(a) of the Act, the prescribed extent is an extent of at least 10%.

Adaptation — subsection 218.1(1) of Act

7.01 If a person is the recipient of an imported taxable supply of property or a service and the person is a provincial investment plan or provincial stratified investment plan at the time an amount of consideration for the supply becomes due or is paid without having become due, subsection 218.1(1) of the Act is adapted in respect of the amount of consideration for the supply as follows:

218.1 (1) Subject to this Part,

A × B × C

where

A × B × C

where

Non-application — paragraph 218.1(1)(a) of Act

7.02 Paragraph 218.1(1)(a) of the Act does not apply in respect of an amount of consideration for an imported taxable supply of intangible personal property or a service made to a person if

A/B

where

Adaptation — subsection 218.1(1.2) of Act

7.03 If a person is a qualifying taxpayer, within the meaning of subsection 217.1(1) of the Act, for a specified year of the person, as defined in section 217 of the Act, and if the person is a provincial investment plan or provincial stratified investment plan at any time in a fiscal year of the person that ends in the specified year, subsection 218.1(1.2) of the Act is adapted in respect of the specified year as follows:

(1.2) Subject to this Part, every qualifying taxpayer that is a provincial investment plan or provincial stratified investment plan at any time in a fiscal year of the qualifying taxpayer that ends in a specified year of the qualifying taxpayer shall, for the specified year and for each particular participating province, pay to Her Majesty in right of Canada, in addition to the tax payable under section 218.01, tax calculated at the tax rate for the particular participating province on

A + B

where

A1 × A2

where

B1 × B2

where

C × D

where

30 Section 10 of the Regulations is amended by striking out “or” at the end of paragraph (a), by adding “or” at the end of paragraph (b) and by adding the following after paragraph (b):

31 Section 11 of the Regulations is amended by striking out “or” at the end of paragraph (a), by adding “or” at the end of paragraph (b) and by adding the following after paragraph (b):

32 The Regulations are amended by adding the following after section 12:

Adaptation — subsections 220.07(1) to (4) of Act

12.1 If a person imports goods, other than a specified motor vehicle, into Canada, if the person is a provincial investment plan or a provincial stratified investment plan at the time the goods are released and if, in the case of a provincial stratified investment plan, the goods are imported for the purpose of consumption, use or supply in the course of activities relating to one or more provincial series of the person, subsections 220.07(1) to (4) of the Act are adapted in respect of the importation as follows:

220.07 (1) Subject to this Part, every person that imports goods, other than a specified motor vehicle, that are accounted for as commercial goods (as defined in subsection 212.1(1)) under section 32 of the Customs Act, that is a provincial investment plan or provincial stratified investment plan at the time the goods are released and that is liable under that Act to pay duties on the goods, or would be so liable if they were subject to duty, shall pay, in addition to the tax imposed under section 212, tax to Her Majesty in Right of Canada equal to the total of all amounts, each of which is determined for a participating province by the formula

A × B × C

where

(2) Tax under subsection (1) does not apply to goods included in Schedule VII.

(3) For the purposes of this section, the value of goods is equal to the value of the goods determined in accordance with section 215.

(4) Tax under subsection (1) on goods imported by a person becomes payable by that person on the day on which the goods are released.

Adaptation — subsection 220.08(1) of Act

12.2 If a person is the recipient of a taxable supply made in a particular province of property or a service, if the person is a provincial investment plan or provincial stratified investment plan at the time an amount of consideration for the supply becomes due or is paid without having become due and if, in the case of a provincial stratified investment plan, the person is acquiring the property or service for consumption, use or supply in the course of activities relating to one or more provincial series of the person, subsection 220.08(1) of the Act is adapted in respect of the amount of consideration for the supply as follows:

220.08 (1) Subject to this Part, every person that is the recipient of a taxable supply made in a particular province of property or a service and that is a provincial investment plan or provincial stratified investment plan at the time an amount of consideration for the supply becomes due or is paid without having become due must pay to Her Majesty in right of Canada, in respect of the amount of consideration, tax equal to the amount determined in accordance with section 13 of the New Harmonized Value-added Tax System Regulations, No. 2.

33 The portion of section 13 of the Regulations before the formula is replaced by the following:

Calculation of tax — subsection 220.08(1) of Act

13 For the purposes of subsection 220.08(1) of the Act, the amount of tax payable under that subsection by a recipient of a taxable supply made in a particular province of property or a service in respect of an amount of consideration for the supply that becomes due, or is paid without having become due, at any time is the total of all amounts, each of which is determined for a participating province by the formula

34 Section 13.1 of the Regulations is repealed.

35 (1) Paragraph 15(a) of the Regulations is replaced by the following:

(2) The portion of paragraph 15(a.1) of the Regulations before the formula is replaced by the following:

36 (1) Subsection 21.1(1) of the Regulations is replaced by the following:

Prescribed person — subsection 261.31(2) of Act

21.1 (1) For the purposes of subsection 261.31(2) of the Act, a selected listed financial institution that is a provincial stratified investment plan is a prescribed person.

(2) The portion of paragraph 21.1(2)(a) of the Regulations before subparagraph (i) is replaced by the following:

PART 10

Application

37 Sections 1 and 2 are deemed to have come into force on February 19, 2014.

38 Sections 3 to 5, 8, 18, 26 to 28 and 36 are deemed to have come into force on July 23, 2016.

39 Sections 6 and 16 apply in respect of any taxation year of a person that begins after July 22, 2016.

40 Section 9 applies in respect of

41 (1) Subsections 13(1), (4) and (5) and sections 20 and 23 apply in respect of

(2) An election under subparagraph (1)(b)(iii) is to

(3) For the purposes of applying paragraph (1)(b),

42 Subsection 13(2) and section 15 are deemed to have come into force on July 22, 2016.

43 Subsections 13(3), 21(9) and 22(1), (3) and (6) apply in respect of any reporting period of a person that ends after June 2010.

44 Sections 14 and 19 apply in respect of any reporting period of a person that begins after July 22, 2016.

45 Subsections 21(1), (4), (7) and (10) and 22(2), (4), (5), (7) and (8) apply in respect of any supply to which an election made under subsection 225.2(4) of the Excise Tax Act applies if that election becomes effective after December 14, 2017.

46 Subsections 21(2), (3), (5), (6) and (8) apply in respect of any reporting period of a person that ends after July 22, 2016.

47 Subsections 21(11) to (13) are deemed to have come into force on June 16, 2016.

48 Section 25 applies in respect of fiscal years of a person beginning after July 21, 2016.

49 Sections 7 to 7.02 of the New Harmonized Value-added Tax System Regulations, No. 2, as enacted by section 29, section 31, section 12.2 of those Regulations, as enacted by section 32, and sections 33 to 35 apply in respect of any supply made after July 22, 2016.

50 Section 7.03 of the New Harmonized Value-added Tax System Regulations, No. 2, as enacted by section 29, applies in respect of any specified year of a person that ends after July 22, 2016.

51 Section 30 applies in respect of property that is brought into a province after July 22, 2016.

52 Section 12.1 of the New Harmonized Value-added Tax System Regulations, No. 2, as enacted by section 32, applies in respect of goods released after July 22, 2016.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Issues

In an ongoing effort to ensure the proper functioning of the goods and services tax/harmonized sales tax (GST/HST), and to respond to issues brought to the attention of Finance Canada by taxpayers and their representatives or by the Canada Revenue Agency, amendments are needed to various existing GST/HST regulations.

Objectives

The objective of the Regulations Amending Various GST/HST Regulations, No. 11 (the Regulations) is to

Description

Specifically, the Regulations comprise amendments to the following GST/HST regulations:

Artists’ Representatives (GST/HST) Regulations

Under the Act, special rules apply in respect of supplies of intangible personal property (such as the right to broadcast a recording of an artist) that are made by artists’ representatives (generally collective societies) prescribed by regulation on behalf of an author, performing artist, painter, sculptor, or other artist. These rules ease compliance with the GST/HST. The Artists’ Representatives (GST/HST) Regulations list the names of the entities that are prescribed for the purposes of this rule. These Regulations are updated to reflect a change in the corporate name of one of these prescribed entities.

Financial Services and Financial Institutions (GST/HST) Regulations

The Financial Services and Financial Institutions (GST/HST) Regulations set out various GST/HST rules that apply in respect of the supply of certain financial-related services or in respect of certain financial institutions. Under the Act, any service provided to an investment plan by its manager cannot be a financial service for the purposes of the GST/HST unless the service is prescribed by regulation (financial services are generally exempt under the GST/HST). These Regulations currently prescribe, for the purposes of this rule, brokerage services provided to a trust governed by a self-directed registered retirement income fund or a self-directed registered retirement savings plan. Amendments to these Regulations will also prescribe, for the purposes of this rule, brokerage services provided to a trust governed by a self-directed tax-free savings account (TFSA), a self-directed registered disability savings plan (RDSP) or a self-directed registered education savings plan (RESP).

These Regulations are also amended to provide that an employee life and health trust is an investment plan for the purposes of the Act. This provision was formerly in the Selected Listed Financial Institutions Attribution Method (GST/HST) Regulations, but has been moved to these Regulations as a result of amendments to the prescribing authority in the Act.

Games of Chance (GST/HST) Regulations

The Games of Chance (GST/HST) Regulations set out special rules under which provincial gaming authorities (e.g. provincial lottery and casino corporations) prescribed by regulation calculate their GST/HST remittances. A housekeeping amendment is made to the French version of these Regulations to replace the expression “à titre gratuit” with the expression “sans contrepartie.” The amendment is made to ensure better consistency in the use of this expression throughout the French version of the Act and its regulations.

Amalgamations and Windings-Up Continuation (GST/HST) Regulations

Under the Act, after the amalgamation or winding-up of a corporation, the continuing corporation is considered to be the same corporation as, and a continuation of, each of the predecessor corporations for certain purposes that are set out in the Act and for the purposes of certain provisions of the Act that are prescribed by regulation. The Amalgamations and Windings-Up Continuation (GST/HST) Regulations list the provisions of the Act that are prescribed for the purposes of this rule.

These Regulations are amended to add a reference to section 273.2 of the Act, under which a financial institution determines whether it is required to file an annual information return. As a result of this amendment, a continuing corporation would be required to use information from the corporate entities that existed prior to the amalgamation or winding-up in making this determination.

Offset of Taxes (GST/HST) Regulations

The Offset of Taxes (GST/HST) Regulations set out the circumstances, conditions and rules under which a person may reduce or offset certain amounts that the person is required to remit or pay on account of the GST/HST to the Receiver General by the amount of a refund or rebate of GST/HST that another person is entitled to. Pursuant to these Regulations, this offsetting is only permitted between corporations that are members of a closely related group. In addition, these Regulations currently state that this offsetting may only apply in two circumstances, provided that the conditions and rules that are set out in these Regulations are met. The first of these circumstances is where a person is required under subsection 228(4) of the Act to pay GST/HST in respect of a supply of real property directly to the Receiver General. This circumstance would arise where the supplier of the real property is not required to collect the GST/HST in respect of the supply. The second of these circumstances is where a person is required under subsection 228(2) of the Act to remit an amount of net tax for a reporting period of the person. It should be noted that this second circumstance does not apply where the person is a selected listed financial institution with a monthly or quarterly reporting period. Generally speaking, a “selected listed financial institution” or “SLFI” is a financial institution that operates in an HST-participating province and in at least one other province.

The Offset of Taxes (GST/HST) Regulations are amended to provide that the offsetting conditions and rules set out in these Regulations also apply in the following three circumstances. The first is where a person that is an SLFI with a monthly or quarterly reporting period is required under subsection 228(2.3) to remit an amount of net tax for a reporting period of the person. The second is where a person is required under Division IV of the Act to self-assess and pay to the Receiver General an amount of GST/HST that is in respect of certain imported supplies of property or services or, where the person is a financial institution that meets certain criteria, that is in respect of certain expenses incurred outside Canada that relate to its Canadian activities. The third is where a person is required under Division IV.1 of the Act to self-assess and pay to the Receiver General an amount of HST in respect of property or services that are acquired in or brought into an HST-participating province. These amendments apply in respect of any reporting period of a person that ends after July 22, 2016, and in respect of any amount that is required to be paid after that day.

Minor housekeeping amendments are also made to these Regulations in order to correct outdated references in respect of the Canada Revenue Agency.

Streamlined Accounting (GST/HST) Regulations

The Streamlined Accounting (GST/HST) Regulations provide small businesses and eligible public service bodies with optional simplified methods of calculating their GST/HST remittances. These methods allow the business or public service body to remit an amount of tax that is a percentage of its eligible GST/HST-included sales. This allows the entity to generally avoid having to separately keep track of the GST/HST paid on its purchases and collected on its sales.

A housekeeping amendment is made to the French version of these Regulations to replace the expression “à titre gratuit” with the expression “sans contrepartie.” The amendment is made to ensure better consistency in the use of this expression throughout the French version of the Act and its regulations.

Selected Listed Financial Institutions Attribution Method (GST/HST) Regulations

The Selected Listed Financial Institutions Attribution Method (GST/HST) Regulations, along with certain sections of the Act, set out special rules by which certain financial institutions are required to calculate the amount of the provincial component of the HST remittable by them, or refundable to them, for each of their reporting periods. The financial institutions to which these rules apply are referred to as “selected listed financial institutions” or “SLFIs” (generally speaking, financial institutions that operate in an HST-participating province and in at least one other province). Under these rules, SLFIs make adjustments to take into account the provincial component of the HST in respect of the SLFI’s purchases of goods and services for use in activities carried out within both the HST-participating provinces and the non-participating provinces. In the absence of the special rules, the SLFI would be required to track the actual extent to which goods and services purchased by it were for use in each of the HST-participating provinces and in the non-participating provinces. The special rules serve as a proxy for the amount of HST that should be borne by an SLFI on property and services consumed by it in its activities undertaken in relation to the HST-participating provinces, while avoiding the complexity of detailed tracking.

Amendments are made to the Selected Listed Financial Institutions Attribution Method (GST/HST) Regulations in respect of “group registered education savings plans” or “group RESPs.” A “group RESP” is a registered education savings plan that has a group of beneficiaries that are not all related to each subscriber of the plan (i.e. it is neither a family nor an individual RESP). These amendments provide that a trust for a group RESP that has at least one beneficiary resident in an HST-province and at least one beneficiary resident in another province is an SLFI. These amendments also provide that a trust for a group RESP is to calculate the amount of the provincial component of the HST remittable by it, or refundable to it, for each of its reporting periods based on the assets of the trust that are held for the benefit of beneficiaries resident in that province.

These amendments apply in respect of reporting periods of a trust for a group RESP that begin on or after July 22, 2016. They also apply in respect of reporting periods of a trust for a group RESP that begin before that day and that end on or after July 1, 2010, if the trust reports in the return for each of those reporting periods an amount of net tax that is determined as though these amendments applied in the reporting period and if the trust makes an election to have these amendments apply in respect of those reporting periods. The trust will have until one year after the day on which the Regulations are published in the Canada Gazette to file this election. If these amendments apply in respect of reporting periods of a trust for a group RESP that begin before July 22, 2016, the trust will have until six months after the day on which the Regulations are published in the Canada Gazette to file certain elections in respect of those reporting periods that are in the Selected Listed Financial Institutions Attribution Method (GST/HST) Regulations. These elections

Furthermore, where the election is made to allow the manager of the group RESP to file the returns for these past reporting periods on behalf of a group of investment plans all of which are group RESPs, certain deadlines in respect of the registration of this group for the purposes of Part IX of the Act are delayed to six months after the day on which the Regulations are published in the Canada Gazette.

Amendments are also made to the Selected Listed Financial Institutions Attribution Method (GST/HST) Regulations to provide that credit unions are subject to the same rules that currently apply to banks. Specifically, these amendments provide that a credit union, like a bank, is an SLFI if, for both an HST-participating province and for any other province, it has a fixed place of business in the province, maintains a deposit or similar account in the province or has made a loan that is to a person resident in the province or is secured by land in the province. As well, like banks, a credit union is to calculate the amount of the provincial component of the HST remittable by it, or refundable to it, for each of its reporting periods based partly on the salaries and wages it pays to employees of its permanent establishments in that province and partly on the amount of the loans and deposits of those permanent establishments. These amendments apply in respect of any reporting period of a credit union that begins after July 22, 2016.

A further amendment is made to these Regulations that applies in respect of an investment plan that is a particular type of income tax-exempt corporation owned by one or more pension plans. This amendment provides for an election that allows such a corporation to determine its liability for the provincial component of the HST under the general rules that apply to corporations for any reporting period for which it filed a GST/HST return before May 8, 2013, the date on which the HST rules that apply to this particular type of corporation were published in the Canada Gazette. In the absence of this election, the corporation would determine its HST liability under the rules that apply to distributed investment plans (generally investment plans that are distributed to the public, such as mutual funds). This election is only available in respect of a reporting period if the corporation filed its return for the reporting period before May 8, 2013, and if it reported in that return an amount of net tax that was determined as though the general rules in respect of corporations applied to it.

Under the Selected Listed Financial Institutions Attribution Method (GST/HST) Regulations, different rules apply in respect of “distributed investment plans,” which are generally investment plans that are distributed to the public such as mutual funds, and in respect of “private investment plans,” which are generally investment plans that are made available to a restricted group of persons such as retirement compensation arrangements and employee benefits plans. Under these Regulations, a unit trust is considered to be a distributed investment plan. Certain types of private investment plans, however, may be structured as unit trusts. As a result, these investment plans may be inadvertently subject to the rules regarding distributed investment plans. These Regulations are therefore amended to clarify that these types of investment plans are private investment plans and not distributed investment plans. This amendment applies as of July 1, 2010, the date that these investment plan rules were enacted.

Various amendments are made to these Regulations that are consequential to amendments to the Act that received royal assent on December 14, 2017. One set of these consequential amendments relates to pension plans. In particular, the Act provides for special rules that apply to determine the GST/HST liability of “pension entities” of pension plans. These pension entities are trusts or corporations that hold and invest funds for the benefit of the beneficiaries of a pension plan. Amendments to the Act provide that these special rules also apply in respect of “master pension entities,” which are trusts or corporations that hold and invest funds of two or more pension entities. Amendments to these Regulations update the cross-references to the rules in the Act relating to pension plans so that the new rules in the Act relating to master pension entities are also cross-referenced.

Further consequential amendments relate to an election that certain SLFIs may make under the Act. This election provides an optional alternative method for accounting for supplies made to an SLFI by another person that is closely related to the SLFI in the determination of the SLFI’s liability for the provincial component of the HST. Previously this election was required to be made jointly by an SLFI and another entity, but it now may only be made by the SLFI alone. References to this election that are in these Regulations therefore need to be amended to reflect the fact that it is no longer a joint election.

Other amendments to these Regulations correct minor errors or are of a housekeeping nature. In particular, certain special calculations contained in these Regulations relate to the change in rate of the provincial component of the HST for Prince Edward Island that came into effect on October 1, 2016. These calculations incorrectly referred to the number of days in a fiscal year or a reporting period of an SLFI that are before October 1, 2016. These references are corrected so that they now refer to the number of days after September 30, 2016. Also, certain references to the rate of GST as set out in the Act are amended in order to ensure that the rate of the provincial component of the HST is not inadvertently being referenced. Finally, a housekeeping amendment is made to the French version of the definition “net premiums” in subsection 24(1) of these Regulations. The French version of this definition is amended to replace the reference to the term “résiliation” by a reference to the term “annulation” to ensure a better consistency with the English version.

New Harmonized Value-added Tax System Regulations

The New Harmonized Value-added Tax System Regulations contain special rules that relate to the HST, including transitional rules that relate to the change in rate of the provincial component of the HST for Prince Edward Island that came into effect on October 1, 2016. Amendments to these special rules are made to take into account the new rules that apply under the Act in respect of the determination of the GST/HST liability of master pension entities.

New Harmonized Value-added Tax System Regulations, No. 2

The New Harmonized Value-added Tax System Regulations, No. 2 contain additional special rules that relate to the HST. The amendments made to these Regulations are consequential to amendments to the Act that were enacted on December 14, 2017. The amendments to the Act and to these Regulations ensure that an investment plan that has beneficiaries in only one HST-participating province (and that is therefore not an SLFI, as described above) and that is resident in another province is required to pay HST at the rate of the province of residency of the beneficiaries. Previously, these rules could be interpreted in certain cases as imposing the GST/HST based on the province of residency of the investment plan, which is generally based on the residency of the trustee or manager of the investment plan, as opposed to being based on the province of residency of the beneficiaries.

“One-for-One” Rule

Finance Canada has determined that these amendments would not impose new administrative burden on businesses, nor would they result in any reductions in administrative burden. Therefore, the “One-for-One” Rule does not apply.

Small business lens

Finance Canada has determined that these amendments would not result in new compliance or administrative costs for small businesses. Therefore, the small business lens does not apply.

Consultation

On July 22, 2016, and on September 8, 2017, Finance Canada released a number of draft regulatory proposals relating to technical and housekeeping changes to the goods and services tax/harmonized sales tax (GST/HST) for consultation through its website. Six comments were received in response to the 2016 release and no comments were received in response to the 2017 release. Stakeholders expressed support for the draft amendment, and the comments provided were minor and technical in nature. They were taken into consideration during the development of these amendments in their final form.

Rationale

The Regulations provide for the proper functioning of the GST/HST by clarifying the policy intent of certain rules and by simplifying the application of the GST/HST for certain businesses. The Regulations also serve to make technical housekeeping changes and amendments that are consequential to amendments to the Excise Tax Act.

Given that these amendments clarify existing regulations and do not impose new requirements, no additional costs for businesses, Canadians, or the Government of Canada are anticipated in association with these changes.

Contacts

Gregory Smart
Sales Tax Division
Department of Finance
90 Elgin Street
Ottawa, Ontario
K1A 0G5
Telephone: 613‑369‑3794

Dawn Weisberg
Excise and GST/HST Rulings Directorate
Canada Revenue Agency
320 Queen Street
Ottawa, Ontario
K1A 0L5
Telephone: 613‑670‑1344