The Canada Revenue Agency has reversed its long‑standing position, declaring that trailing commissions paid by fund managers to dealers are taxable under GST/HST, effective July 1. Dealers and advisors may need to register for GST/HST if their taxable revenues exceed $30,000 over four consecutive quarters, and will have to adjust accounting systems to collect and remit the tax. The CRA will publish a formal technical interpretation in the coming weeks, clarifying the taxable status of trailing commissions and confirming that upfront commissions remain exempt.
Effective July 1, the CRA’s new interpretation on trailing commissions becomes enforceable.
Dealers and advisors with total taxable revenues exceeding $30,000 over four consecutive quarters must register for GST/HST.
No, upfront commissions remain exempt as they relate to the initial issuance of units.
They must set up accounting systems to track GST/HST collectible, generate debit notes and invoices for input tax credit claims, and file net tax on GST/HST returns.
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