April 25, 2013
Employers —New GST/HST Relief Available Under Pension Plan Rules
Employers and registered pension plans may want to take advantage of some changes to the GST/HST pension plans rules announced in the recent federal budget. Employers should carefully assess their situations because they may actually benefit more if they make a new election for their 2014 fiscal year instead of 2013.
The 2013 federal budget proposes two measures that could reduce some employers’ compliance requirements: an election to allow qualifying employers not to account for GST/HST on actual taxable supplies made to pension entities and a relief measure for some employers with limited amounts of deemed taxable supplies.
This TaxNewsFlash-Canada provides an overview of some key points employers may want to consider as they evaluate whether they can benefit from the proposed measures.
A new election for GST/HST on actual supplies
Employers should note two key issues related to the new election for eligible actual supplies:
· If the election is made for 2013, how will the employer deal with tax on actual supplies up to March 21, 2013 and deemed supplies for the full year?
· Employers who make the election will need to have measures in place to ensure the tax on the deemed supplies is calculated as required and remitted on time. Otherwise, the CRA could revoke the election.
Employers and pension entities will need to review the budget measure carefully based on their own facts and circumstances to determine whether they are eligible to make the election and whether they will benefit from it. Along with the issues above, points employers should consider before making the election include:
· What will be the effect of the reduced actual supplies for 2013 on the calculations of the tax adjustment note (TAN)?
· What will be the effect of the new rules on the total tax paid related to pension plans?
· Will there be any real reduction of compliance requirements for 2013?
New thresholds related to deemed supplies
Currently, under the GST/HST pension plan rules, an employer is required to calculate and remit an amount of GST/HST on deemed supplies in respect of the employer’s resources acquired, used or consumed in the course of pension activities, even where the employer’s involvement in the pension plan is minimal.
An employer would generally be relieved from the rule for deemed supplies under the GST/HST pension plan rules if they meet the following two thresholds:
· The amount of GST related to deemed supplies in the preceding fiscal year by the employer and other related employers is less than $5,000, and
· That same amount of GST on deemed supplies is less than 10% of the total net GST paid and deemed paid by all pension entities in the pension plan.
If an employer does not qualify under the above two thresholds, the employer may qualify under another rule for limited relief but only for some specific deemed supplies (i.e., internal supplies). The rule for this limited relief includes other thresholds to meet.
Employers will have to carefully consider the following when reviewing this new measure for deemed supplies:
· The $5,000 threshold includes GST on deemed supplies of all related employers
· The 10% threshold includes GST paid or deemed paid by all pension entities of the same registered pension plan
· The calculations are done on a yearly basis
· This new measure does not appear to allow an employer to elect out of its application
· The budget measure applies only for fiscal years that begin after March 21, 2013
· The applicable taxes on actual supplies still have to be remitted.
Quebec Sales Tax
Have you met your GST/HST compliance
For more information on pension plan filing deadlines, see KPMG’s TaxNewsFlash-Canada, “Pension Plans — Your GST/HST Filing Deadlines Are Fast Approaching”, dated December 13, 2012.
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Information is current to April 24, 2013. The information contained in this TaxNewsFlash-Canada is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG’s National Tax Centre at 416.777.8500.
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