GST Announcements Affect Financial Services

Evelyn Jacks

Starting July 1, 2026 mutual fund agents must register and collect the GST/HST on trailing commissions earned if they exceed $30,000 (the small supplier threshold). This news, provided only to “relevant stakeholders” is far reaching and still open to consultation. It may not, in the end, result in a revenue gain for the government, as input tax credits will be claimable. But it will bring to the fore a whole new base of taxfilers to audit in the future. Here’s what to know:

CRA’s Changed Interpretation. Trailing commissions were previously considered exempt from GST/HST as they represented a connection to the exempt financial service of selling a financial instrument to an investor.

CRA’s new interpretation, based on how the financial services industry is characterizing services provided in exchange for trailing commissions, is that advisors provide support to clients on their investment account under ongoing obligations. Hence, those commissions paid to both the advisor who originally sold the financial instrument to the client, as well as advisors to whom these instruments were subsequently transferred should fall under non-exempt services for GST/HST purposes. 

The Tax Compliance Mechanics. This news is relevant to all mutual fund managers, investment dealers and commissioned sales agents. They should immediately discuss the following:

1. Reporting Income. Are agents “small suppliers” with taxable earnings under $30,000? In this case, registration is not required. Otherwise registration for GST/HST remittances will be required on all trailing commissions.

There are also some additional, more thorny questions. Do commissions include the GST/HST, or is the GST/HST extra? Also, what is the location that determines the rate of GST/HST? 

Note that it appears that CRA considers the initial issuance of the investments remains an exempt supply including up front trading fees or commissions.

2. Claiming ITCs. The GST/HST remittances can be reduced by Input Tax Credits – GST/HST paid on expenses incurred to earn taxable revenues – but only after June 30, 2026. However proper documentation is required to pass future audit requests. Receipts must identify:

• The name of the recipient of the supply and the business name/name of agent
• The name of the supplier and their GST/HST registration number
• The invoice date or the date the tax is paid or payable
• The total paid for the supply in question and the amount of GST/HST paid

Clarification re Other GST Changes. On January 27, CRA also issued Excise and GST/HST News - No. 121 with additional news regarding the elimination of the Underused Housing Tax (UHT) for the 2025 calendar year and subsequent years and the partial elimination of the Luxury Tax.

Under the November 4 budget’s proposed amendments, no UHT is payable, and no UHT return is required to be filed for the 2025 calendar year or any subsequent years. It has been cancelled. But the news release confirms this does not apply to the 2022, 2023 or 2024 calendar years and importantly, related penalties and interest are accruing and will be charged  for those who have not complied.

The government also proposed to eliminate the luxury tax on “subject aircraft and subject vessels” effective November 5, 2025, although it warns that prior records can of course be audited and should be retained for the normal retention period of six years after the end of the year to which they relate. The release explains the following rules for reporting in the transition period ending November 4:

• “Filing and Reporting: Registrants, and persons that are not required to be registered, with liability for luxury tax on subject aircraft or vessels for the period October 1, 2025, to November 4, 2025, must include amounts owing in their quarterly return for the period ending December 31, 2025. After December 31, 2025, filing requirements would no longer apply for subject aircraft and vessels.
• Certificates: Exemption, tax, and special import certificates would no longer be required for subject aircraft and vessels after November 4, 2025. However, previously issued certificates must still be retained for six years after the end of the year to which they relate.
• Registration: Vendors in respect of subject aircraft or vessels, would no longer be required or permitted to register after November 4, 2025. Registrations for these items would be automatically cancelled on February 1, 2028. Registration in respect of subject vehicles would be unaffected.”

GST/HST Ruling Scam. Scam letters that appear similar to CRA correspondence, GST/HST rulings or interpretations have been circulating; some referencing the name of CRA officials or other publicly available information. While there are no solutions yet, CRA is exploring measure to protect their messaging and inviting taxpayers and/or professionals to call if they are unsure of authenticity of the Rulings they have received. The number is 1‑800‑959‑8287. CRA notes that a GST/HST Rulings officer will assist in confirming whether the correspondence has been issued by the CRA or not. It further states:

A GST/HST ruling applies only to the taxpayer who requests it (or on whose behalf it is requested) and only to the issues specifically covered by the ruling. You can request a ruling or interpretation on how the GST/HST applies to a specific transaction for your operations. This service is provided free of charge. For more information, refer to GST/HST Memorandum 1-4, Excise and GST/HST Rulings and Interpretations Service.

Bottom Line. There are big systems changes for the financial services industry that requires new tax compliance vigilance and a digital relationship with the CRA’s GST/HST department, which is itself undergoing significant challenges. Financial advisors affected should discuss changes that affect them as soon as possible with their compliance officers, branch managers and tax advisors. They should also be prepared to discuss CRA rule changes and scams across multiple tax regimes – income tax, corporate tax, sales and excise tax, cross border tax amongst them - with their clients.