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Financial Institutions — More GST/HST Changes and More Risks 

Canadian Tax Adviser

 

April 17, 2012

 

Financial institutions have faced significant GST/HST changes in the last few years and now face more changes to address British Columbia transitioning back to GST and PST, Quebec harmonizing its QST to the GST and upcoming legislative amendments. In fact, the numerous changes to the law and administrative policies are making it difficult for some entities to calculate and pay the right amount of GST/HST and be fully compliant with all the GST/HST rules. Significant amounts of money may be lost to non-compliance penalties or simply left as unclaimed recoveries.

As you prepare your 2011 GST/HST annual returns, it may be a good time to have both your 2011 and 2010 GST/HST returns reviewed for compliance issues and recovery opportunities, and to prepare your systems and processes for the upcoming changes.

 

KPMG has prepared a checklist to help you determine whether a review of your 2011 and 2010 GST/HST returns may be worthwhile and to help you assess the impact of new challenges on your organization.

 

Have you considered the impact of the following key changes on your systems, processes, and returns?

 

  1. The significant changes to the Special Attribution Method (SAM) and its numerous adjustments (e.g., transitional rules, recaptured input tax credit requirements, provincial attribution and supplies between related parties)
  2. The upcoming harmonization of the QST to the GST in which financial services are proposed to become QST-exempt services, which should eliminate the ability to recover the QST paid on related expenses
  3. The B.C. transition back to GST and PST with all the related compliance issues and obligations (e.g., separate returns, PST self-assessment on some expenses)
  4. The special rules for charging fees to mutual and segregated funds, taking into account the B.C. transition back to GST and PST and Quebec’s harmonization of its QST to the GST and ongoing rate changes
  5. The recently shortened deadline to recover overpaid PST in Ontario of December 31, 2012 or earlier, depending on the circumstances
  6. The new self-assessment and rebate rules on inter-provincial supplies for non-selected listed financial institutions and on claims costs for insurers, if applicable
  7. The self-assessment rules on deductible expenses and the effect of the CRA’s administrative position on “loading” (i.e., non-risk component of deductible expenses)
  8. The legislative changes to “arranging for” financial services and the CRA’s new related administrative policy
  9. The tax-effective structuring of intercompany and third-party transactions
  10. Your annual information returns and their related severe non-compliance penalties
  11. The recent changes to the place of supply rules that could affect the GST/HST and QST you must collect on your taxable supplies
  12. Your new remittance and reporting obligations under the GST/HST pension plan rules for employers and their pension plans.

 

How KPMG can help
KPMG can help you meet these challenges and can help you build organizational confidence and assure stakeholders that you are addressing risks. We can:

 

  • Review your GST/HST returns, provincial attribution, blended rates if applicable, and supporting documentation to help you correct compliance issues and identify GST/HST recoveries
  • Review your allocation methodology to determine whether the method can be improved
  • Review your annual information returns and reconcile information with your GST returns, corporate income tax returns and other documentation
  • Assist you in identifying tax paid in error or in making changes to reduce overpayments of GST/HST, QST and PST on an ongoing basis
  • Assist you in making changes to your systems and processes so you can meet your filing requirements
  • Recommend and help implement tax planning opportunities

 

It’s critical to understand how these numerous changes can affect your business. KPMG’s Tax team simplifies this process for you. We are well versed on all of the GST/HST, QST and PST changes and trends relating to the financial services industry, and we bring to you our in-depth knowledge and experience.

 

For more information, contact your KPMG adviser.

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