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Possible rebate for GST Paid on Certain Investment Management Fees

Subject: Possible GST Rebate Number: 09-17 Date: 8/10/2009

Do not be surprised if the rebate claim is denied

Based on the recent Federal Court of Appeal decision in Canadian Medical Protective Association (CMPA), taxpayers may be able to recover GST paid on certain investment management fees paid over the past two years.

The CMPA obtained a rebate of GST it had paid on discretionary investment management fees as “GST paid in error.” The Court of Appeal ruled that the investment management services were “arranging for” the transfer of securities, which is an exempt financial service under the GST.

A person who has paid a significant amount of GST on this type of investment management service over the past two years, may want to make a rebate claim by filing a Form GST189 (available at cra.gc.ca/forms) with the Canada Revenue Agency within two years of when the GST was paid.

If the investments are in a corporation, partnership or trust whose “principal activity is the investing of funds,” or in an “investment plan” such as an RRSP, then the rebate is less likely to be available.

Do not be surprised if a rebate claim is denied. The CRA is still considering its response to the CMPA case, and may reject all such claims on the basis that the facts are not identical to CMPA. If a claim is denied a Notice of Objection and possibly an appeal to the Tax Court of Canada can be considered. However, an objection cannot be filed if a claim is not made within the two-year deadline. Note also that any rebate you receive may effectively be taxable for income tax purposes, reducing the value of the rebate.

If you have a significant amount at stake and wish to pursue a claim for the GST you paid your investment advisors, please contact your TSG tax professional and we will be pleased to assist you with the process.

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