GST Rules To Change For Financial Services

The Minister of Finance, The Honourable Jim Flaherty, released a statement recently advising proposed changes contained in the Notice of Ways and Means Motion tabled on March 22, 2010 will provide clear GST rules for those within the financial services industry.

The draft legislation relating to the application of GST within the industry was introduced to improve on the legislation previously released in January 2007. The current system for applying GST contains very complex rules relating to registered pension plan trusts, and the new system will offer an equitable application of GST rebates and an updated process for GST returns to provide improved reporting.

Some highlights of the draft legislation are as follows:

• The CRA and financial institutions will have an improved and more flexible pre-approval process for the allocation method of input tax credits (ITC's)
• Canadian financial institutions with foreign branches can choose a self-assessment process that is simpler to implement when services are provided by those foreign branches
• Banks and other large dealers will be allowed to use their own methods to allocate ITC's
• Large derivative transactions undertaken by financial institutions could be excluded from self-assessment rules.
• A new GST annual information return would be introduced, due the same time as the institution's annual tax return

To review the GST Notice related to the changes, link here.

Educational Resources: For more information on tax planning provisions and compliance requirements subscribe to The Knowledge Bureau's online tax reference for taxpayers, financial advisors and their clients: EverGreen Explanatory Notes.