Back in October 2010, the Canada Revenue Agency (CRA) issued a draft technical bulletin, GST/HST Notice 257, regarding the GST/HST rebate for pension entities, which aimed at clarifying the eligibility and calculation of rebates for multi-employer pension plans. The bulletin discussed the implications of Bill C-9, which introduced new rebate rules effective September 23, 2009. The key changes included a 33% rebate for qualifying pension entities on the GST/HST they have paid during the reporting period, and the ability for pension entities to share their rebate with participating employers, allowing them to reduce their net tax.

Notice 257 outlined the definitions crucial for understanding the rebate process and explained how rebates are calculated based on eligible amounts, which encompass GST/HST paid on goods and services used in pension activities. Special considerations were made for pension entities where listed financial institutions contribute over 10% to the pension plan, which renders them ineligible for rebates. The document also described various elections that pension entities can make with employers to share rebate amounts.

The CRA had also published guidelines regarding tax adjustment notes (TANs) issued by employers to pension entities, particularly in light of the GST/HST rebate introduced by Bill C-9. This legislation, which received Royal Assent in July 2010, established a mechanism for pension entities to claim GST/HST rebates. CRA GST/HST Notice 261 provided essential details about the requirements for TANs, clarifying the necessary information that employers must include when issuing these documents to ensure compliance with the Excise Tax Act.

One of the primary concerns addressed by Notice 261 was the concept of deemed taxable supplies. Employers registered for GST/HST may find themselves categorized as having made taxable supplies when they provide goods or services to pension entities for their pension activities. This includes situations where the employer charges GST/HST on actual supplies. The TAN serves to adjust the employer's net tax liability, preventing them from being taxed twice on the same transaction while ensuring that pension entities do not receive duplicate rebates or input tax credits.

The issuance of TANs is governed by specific subsections of the Excise Tax Act, namely 232.01 and 232.02. These sections outline the conditions under which TANs can be issued, the required information, and the sequence of operations. Employers must include detailed information about both the actual supply made to the pension entity and the deemed supply for which the TAN is being issued. This helps maintain transparency and accountability in tax reporting and ensures that all parties are aware of their tax obligations and rights regarding rebates.

The implications of these regulations extended beyond mere compliance. They underscored the importance of proper tax planning for employers and pension entities, particularly those that opt to share in pension rebates. Employers who issue TANs must add back any shared rebate amounts to their net tax calculations, highlighting the need for meticulous record-keeping and notification processes between employers and pension entities. This level of detail is crucial to avoid potential penalties and ensure that the benefits of the tax rebate system are fully realized.

In February 2014, the CRA published GST/HST Technical Information Bulletin B-108 “Changes to GST/HST Rules for Pension Plans – New Section 157 and Amendments to Section 172.1” to clarify changes to the GST/HST regulations affecting pension plans. These changes aimed to simplify the GST/HST rules applicable to pension plans, ensuring compliance while alleviating some of the burdens related to tax reporting for participating employers.

The amendments primarily addressed the way participating employers accounted for deemed taxable supplies related to pension plans. Under the new provisions, certain employers, designated as "selected qualifying employers," may be relieved from accounting for tax on deemed taxable supplies. Specifically, if an employer meets certain criteria—such as not having an election in effect under Section 157 and having a deemed GST amount below specified thresholds—they can avoid the complexities of double taxation on actual and deemed supplies. This change was significant as it reduced the administrative burden on employers while ensuring that pension plans were managed efficiently.

In addition to easing compliance, the amendments also provided clarity on various definitions and calculations related to GST/HST obligations for pension entities. For example, the criteria for determining whether an employer qualifies as a "selected qualifying employer" included conditions that assess the previous fiscal year’s tax amounts and specific thresholds. Employers must be aware of how these calculations are performed to ensure they meet the requirements and can benefit from the relief offered by the new provisions. The bulletin also established the necessary guidelines for mergers, amalgamations, and winding-up scenarios, further solidifying the framework within which pension plans operate.

The CRA then provided guidance on the treatment of GST/HST on expenses related to pension plans through its GST/HST Technical Information Bulletin B-032 “Expenses Related to Pension Plans”. This publication, updated in November 2015, served as a reference to clarify how employers can claim input tax credits (ITCs) for pension-related expenses. The bulletin outlined the conditions under which employers can claim an ITC for expenses incurred in relation to pension plans. If an employer, who is a GST/HST registrant, incurs expenses related to a pension plan and meets the criteria set out in section 169 of the Excise Tax Act, they may be eligible to claim an ITC. For instance, if an employer pays for a service directly linked to the pension plan, or if the payment is made from the plan trust assets, they must charge and collect GST/HST and report it as part of their net tax calculation. This process is essential for ensuring that employers accurately account for tax obligations while potentially benefiting from available credits.

Furthermore, the bulletin detailed scenarios where the pension plan trust itself may also claim ITCs or rebates. If the trust is a GST/HST registrant and has paid tax on services that are used for its commercial activities, it can claim an ITC based on the relevant conditions. However, if the trust does not qualify for an ITC, it may still be eligible for a rebate of up to 33% of the eligible amounts incurred, according to section 261.01 of the Act. These provisions highlight the importance of understanding both employer and trust responsibilities in managing pension-related expenses and tax implications.

On July 22, 2016, the CRA proposed legislative amendments aimed at standardizing the GST/HST treatment for master pension entities, commonly referred to as master trusts, which were previously not entitled to claim the 33% GST/HST pension entity rebate, which was reserved for pension entities, as defined in the legislation. These changes were sought to align the tax treatment of these trusts with the existing rules governing pension entities. This initiative was significant for employers sponsoring multiple pension plans, as it affected how tax was calculated and rebates were claimed under the Excise Tax Act.

The proposed amendments, explained and outlined in GST/HST Notice 304 “GST/HST Pension Plan Rules for Master Trusts”, introduced new definitions, including "master pension entity" and "master pension factor," aimed at clarifying the tax implications for participating employers and pension plans. In practice, a participating employer will be deemed to have made taxable supplies to a specified pension entity at the end of their fiscal year. This mechanism allowed employers to collect tax on specified resources used in the course of pension activities. Deemed tax calculations were based on the fair market value (FMV) of these resources, which ensured that tax obligations were transparent and standardized across different pension plans within a master trust. The changes also stipulated that pension entities can claim rebates on both deemed and actual taxes paid, streamlining the financial process for employers.

The implications of these amendments extended beyond mere tax calculations; they also affected the election processes for designated pension entities. Under the proposed rules, employers can elect a specific pension entity to act as a designated entity for claiming tax rebates, which adds complexity to the administrative responsibilities of managing pension plans. Furthermore, if an employer qualifies as a selected qualifying employer, they can benefit significantly from these tax provisions. The need for clear record-keeping and compliance increased, as employers must document their elections and contributions accurately to avoid penalties and ensure rebate eligibility.

In addition to the core tax implications, the CRA's proposed amendments highlighting the importance of enhanced communication between pension entities and participating employers. The requirement for employers to provide prescribed information to pension entities ensured that all parties remained informed about their tax obligations, ultimately fostering a more efficient tax management system. The amendments also introduced provisions for retroactive relief and assessments, offering a safeguard for employers who may have previously miscalculated their tax liabilities under the old rules.