Fund managers and insurance companies (“managers”) that are not registered for QST may need to file a specific new QST return no later than June 30, 2014 to remit QST or claim refunds related to the “Tax Adjustment Transfer Election”. This election is one of the joint compliance elections commonly used by managers and their qualifying funds under the GST/HST selected listed financial institutions (SLFIs) rules.
New QST return
Revenu Quebec recently released this new QST return for non-SLFI managers that do not reside in Quebec and that have Tax Adjustment Transfer Elections, also known as a “TATE”, in effect with their funds. To pay or claim a refund related to a QST tax adjustment, qualifying managers must file the new QST return VD-406.2 “Déclaration de transfert de redressement de taxe par un gestionnaire d’un régime de placement qui ne réside pas au Québec” (available in French only at this time). For many non-SLFI managers, these returns must be received by Revenu Quebec by June 30, 2014.
Generally, managers must apply various complex rules to calculate the GST/HST and QST to collect on management services they supply (or are deemed to supply) to investment plans, such as mutual and segregated funds and to remit these tax amounts to the proper tax authorities.
However, changes to the QST rules in 2013 may have significantly increased the tax complexity and risks for some of these managers. For some managers, both their GST/HST and QST accounts will be administered by the CRA or by Revenu Quebec. For other managers, their GST/HST accounts will be administered by the CRA while their QST obligations will be administered by Revenu Quebec.
Although the QST rules were further harmonized to the GST/HST rules, the QST remains a separate tax from the GST/HST with its own rules and Quebec remains a non-participating province. As such, while managers may use a blended rate to collect tax on their services, these managers must account for the QST owing separately from the GST/HST.
GST/HST joint compliance elections
The Tax Adjustment Transfer Election is one of three joint compliance elections between a manager and its SLFI funds in the GST/HST SLFI rules that are subject to specific rules and conditions. The effects of these elections can vary based on the facts and circumstances of the manager and its funds.
For QST purposes, filing is more complicated due to the limited information currently available on the upcoming QST SLFI rules. However, we understand that these upcoming rules will incorporate similar joint compliance elections.
Charging and remitting taxes
The Tax Adjustment Transfer Election generally allows a manager to apply the SLFI funds’ tax adjustment, calculated with the special attribution method (SAM formula), against the GST/HST collected on its management services. The effect of this election is commonly known in the industry as the managers’ blended rates.
Managers must account and show the amounts relating to GST/HST and QST separately on their GST/HST and QST returns filed with the tax authorities.
For managers located outside of Quebec, the QST tax adjustment will generally result as an amount of QST owing. Generally, GST/HST and/or QST SLFI managers remit any QST owing from a QST tax adjustment, as well as any GST/HST tax adjustment, in their GST/HST and QST returns they file with the CRA. However, non-SLFI managers that are located outside Quebec and that are not registered for QST purposes must file the new QST return to remit or claim any QST tax adjustments with Revenu Quebec no later than the day the funds are required to file their interim returns or final returns, as the case may be. For many funds, that deadline is June 30, 2014. These non-SLFI managers will include the GST/HST tax adjustments in their GST/HST returns.
We can help
Many of the GST, HST, and QST rules relating to managers and their funds vary based on several factors, including whether the entities are SLFIs or non-SLFIs, the entities’ permanent establishments and whether the entities have filed any compliance elections. We can help you understand and fulfill your indirect tax compliance obligations, which could include GST/HST and QST returns as well as annual information returns. KPMG's Financial Institutions Indirect Tax Compliance Centre has a team of multi-disciplinary professionals who specialize in indirect tax compliance requirements for the financial services sector. We can help you carefully navigate this maze of complicated rules and help you meet your compliance requirements and reduce related compliance risks and overall tax costs.
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Information is current to June 20, 2014. 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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