www.pwc.com/ca/indirect-tax
Preparing to file the pension
rebate application and the
GST/HST Selected Listed
Financial Institution (SLFI)
return
May 5, 2011
Agenda
Introduction
Pension Rebate
• Overview of pension rebate rules
• Completion of form RC4607 rebate application
GST/HST Return for SLFIs
• Overview of SLFI rules
• Completion of form GST494 GST/HST Final Return for SLFIs
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1. GST/HST Pension Rebate
Overview
• Rebate previously available to a multi-employer pension plan
(“MEPP”)
• New rules for rebates for claim periods beginning on or after
September 23, 2009
• MEPP rules still apply to prior periods
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1. GST/HST Pension Rebate
Deemed Supplies
• Deemed taxable supplies by employers
• Employer informs pension entity of deemed tax
• Amounts of GST/HST on deemed supplies not actually paid by the
pension entity, but deemed to be paid
• SLFIs deemed to pay GST (or federal component of HST)
• non-SLFIs deemed to pay total GST/HST
• Eligible amounts of deemed tax included in “B” of the rebate
calculation
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1. GST/HST Pension Rebate
Eligibility
• Available to pension entities (i.e., pension trusts and pension
corporations that are governed by a registered pension plan) that are
qualifying pension entities
• “Qualifying Pension Entity” – pension entities excluding those having
10% or more of contributions in the preceding calendar year (or
expected in the current year) made by listed financial institutions
• Trustee responsibility, but application likely completed by employer
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1. GST/HST Pension Rebate
SLFI vs non-SLFI Pension Entities
• Non-SLFIs – claim 33% of total GST/HST actually paid or deemed
to have been paid (less recoverable amounts)
◦ RC4607 Rebate Form only
• SLFIs – claim 33% of GST or federal component of HST paid or
deemed to have been paid (less recoverable amounts)
◦ RC4607 Rebate Form (federal portion only)
◦ GST494 GST/HST Return (provincial portion, calculated as part
of the SAM formula) – see SLFI rules
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1. GST/HST Pension Rebate
Timing
• RPPs registered for GST/HST
- Claim period is the pension entities reporting period
- Rebate must be filed within two years of GST/HST return due date
◦ e.g., 2010 rebate must be filed by June 30, 2013 (i.e., two years
after the June 30, 2011 due date for the 2010 GST/HST return)
• RPPs not registered for GST/HST
- Claim period #1 is first half of year (Q1 & Q2)
- Claim period #2 is second half of year (Q3 & Q4)
- Rebate must be filed within two years of ‘claim period’
◦ e.g., Jan to Jun 2010 rebate must be filed by June 30, 2012
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1. GST/HST Pension Rebate
Timing
• Important – pension entities registered for GST/HST effective
July 1, 2010
• Two claim periods
1. Jan to Jun 2010, claim before June 30, 2012
2. Jul to Dec 2010, claim before June 30, 2013
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1. GST/HST Pension Rebate
Application Form
Form RC4607
• Choice to include rebate on GST/HST return of pension entity
•
•
•
•
•
•
Part A – Eligibility
Part B – Identification of the pension entity
Part C – Rebate calculation
Part D – Certification
Part E* – Election (1 – employers engaged in commercial activities)
Part F* – Election (2 & 3 – non-commercial activities or nonqualifying pension entity)
• Part G* – Provincial pension rebate amount (only if SLFI pension
entity that has completed Part E or F
* only if election made
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1. GST/HST Pension Rebate
Part C – Rebate calculation
“A”
Actual
GST/HST
“B”
Deemed
GST/HST
“D”
Recoverable
Amounts
33%
“F”
Pension
Rebate
Amount
• Actual tax– paid on actual supplies from employer or third party
• Deemed tax– deemed to be paid on deemed supplies from employer
• Recoverable amounts – ITCs, other rebates, adjustments
- 0 in most cases
- e.g., ITCs claimed by pension entity involved in commercial real
estate management
• Rebate reduced by amounts transferred to employer (“G”)
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1. GST/HST Pension Rebate
Parts E & F – Elections to Transfer
• Election 1 – employer/s engaged exclusively in commercial activities
- Choose to transfer any or all of rebate from plan to employer/s
• Election 2 – non-commercial activities
• Election 3 – non-qualifying pension entity
• For elections 2 and 3:
- Amount transferred to employer limited by degree of participation
in the plan (based on contributions or, if none, active members)
- Employer’s net tax deduction limited by ‘tax recovery percentage’
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1. GST/HST Pension Rebate
Elections to Transfer – Employer’s Net Tax Deduction
Non-SLFI Pension Entity
Employers
Net Tax
Deduction
Pension
Rebate
Amount
Transferred
Tax
Recovery
Rate (2 & 3)
SLFI Pension Entity
Employers
Net Tax
Deduction
Pension
Rebate
Amount
Transferred
Provincial
Pension
Rebate
Amount
Transferred
Tax Recovery
Rate (2 & 3)
• Pension Rebate Amount for SLFI (GST / federal part of HST only)
• Provincial Pension Rebate Amount
- Based on ‘provincial attribution percentage’ for HST provinces
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1. GST/HST Pension Rebate
Payment due to Tax Adjustment Notes
• Actual and Deemed supply of same resources
• Employer issues a Tax Adjustment Note (TAN) to pension entity
• Pension entity claims rebate on both actual and deemed GST/HST
• Pension Entity makes a payment to Receiver General equal to 33% of
GST/HST adjusted on TAN (due end of subsequent ‘claim period’)
OR
• If election made to transfer rebate to employer, employer must add
an equivalent amount to its net tax
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1. GST/HST Pension Rebate
Example
• Facts & Assumptions
- Employer purchases all pension management/admin services from
third parties and the pension entity pays the third party
- Pension entity and employer have Dec 31 year end
- Trustee of pension entity is resident in Ontario
- Pension entity is not entitled to claim ITCs
- Pension entity is an ‘eligible pension entity’
- No election to transfer all or part of the rebate to employer
• Active Members & Contributions
- Ontario
50%
- Alberta
50%
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1. GST/HST Pension Rebate
Example
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1. GST/HST Pension Rebate
Example – SLFI vs non-SLFI rebate
SLFI
non-SLFI
“A”
Actual Tax
25,000
49,000
“B”
Deemed Tax
25,000
37,000
“C”
A+B
50,000
86,000
“D”
Recoverable Amounts
0
0
“E”
C–D
50,000
86,000
“F”
Pension Rebate Amount (E * 33%)
16,500
28,380
• Rebate will be reduced by any transferred amounts (“G”)
• Pension entity must repay 33% of amounts adjusted on TAN
• SLFI gets rebate of provincial portion through SAM calculation
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2. Selected Listed Financial Institution (SLFI) Rules
Overview / Purpose
Purely a result of the HST applying in some provinces, but not in others
Government solution to the need to remove any incentive/reward for
investment vehicles (including registered pension plans) to either
relocate to or selectively source services from a non-HST province
Main Target – Mutual Funds
Also caught – Pension Plans
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2. Selected Listed Financial Institution (SLFI) Rules
Who is a SLFI?
Listed Financial Institutions
• Investment Plan, including a trust governed by an RPP
• Also includes trusts governed by RRSPs, RCAs, DPSPs, EPSPs, etc
SLFIs
• Permanent establishment (PE) in HST province and another province
(e.g., Ontario and Alberta) at any time during the taxation year
• Pension entities have PE in each province in which members of the
plan reside
• ‘Members’ include current employees, deferred vested and pensioners
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2. Selected Listed Financial Institution (SLFI) Rules
SLFI - Exceptions
Substantially all members in non-HST provinces
• >90% of members reside in non-HST provinces and
• Value of assets (DC) or actuarial liabilities (DB) for members resident
in HST provinces is<$100m in prior fiscal year
Qualifying Small Investment Plans (QSIPs)
• ‘unrecoverable tax’ incurred by the pension entity in prior fiscal year
is <$10,000 (i.e., $200,000 of purchases subject to GST in 2009)
• ‘unrecoverable tax’ is actual tax paid by pension entity, less ITCs
• Deemed tax will be included in ‘unrecoverable tax’ when determining
if a pension entity is a QSIP from 2012
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2. Selected Listed Financial Institution (SLFI) Rules
Where are we now?
Registration
• SLFI pension entities should have registered effective July 1, 2010
• Only required to register if making elections (see below)
• Voluntary registration if not making elections to avoid monthly filing
Reporting / Filing elections
• Reporting entity – employer to file GST/HST return for pension plan
• Consolidated filing – employer to file one GST/HST for many plans
• Tax adjustment transfer election – likely not made by pension plans
• Effective July 1, 2010
• CRA has discretion to accept late filed elections
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2. Selected Listed Financial Institution (SLFI) Rules
SLFI Return
2010 GST/HST Return for SLFIs
• Form GST494
• Due June 30, 2011 (SLFIs deemed to have calendar year as fiscal year)
• Trustee responsibility – shifted to administrator if ‘reporting entity
election’ completed
• Trustees have indicated they will not file
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2. Selected Listed Financial Institution (SLFI) Rules
SLFI Return
Part A Identification of SLFI or consolidated group
Part B Reporting Period Information
Part C Installment Method Elected for Transitional Year
Part D Calculation under the Special Attribution Method
Lines 020 -040 (p.8 and 9) – annual column only
Part E Calculation of Final Adjustments to Net Tax
Lines 101-119
Part F Percentages and Totals for Provinces
Part G Certification
Part H Schedule B (Not Applicable)
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2. Selected Listed Financial Institution (SLFI) Rules
SLFI Return
Part D – Special Attribution Method (‘SAM Calculation’)
• Key element of SLFI Return
[(A – B) x C x D/E] – F +/- G
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2. Selected Listed Financial Institution (SLFI) Rules
Element C – Provincial Attribution Percentage (PAP)
Defined Benefit Plans
• Actuarial liabilities for members in province as proportion of total
• As at most recent actuarial report in current or prior three years, or
September 30 of prior fiscal year
Defined Contribution Plans
• Assets for members resident in province as proportion of total
• As at September 30 of prior fiscal year
Hybrid Plans
• Weighted average (based on assets) of the DC component PAP and the
DB component PAP
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2. Selected Listed Financial Institution (SLFI) Rules
Element G – Adjustments
Transitional Adjustment
• GST payable before July 1, 2010 excluded from the SAM calculation
(a) Pension Rebate
• 33% GST/HST rebate of the provincial tax on actual &deemed supplies
(b) Deemed Supplies
• SLFIs deemed to have paid only GST (or federal portion of HST)
• Provincial portion of HST included in adjustments to SAM Calculation
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2. Selected Listed Financial Institution (SLFI) Rules
Example – Single Pension Entity
Facts
• Same facts as example for GST/HST pension rebate
• Ontario Defined Benefit RPP, SLFI, GST/HST registered
• Value of actuarial liabilities for all members (active, deferred vested,
pensioners) resident in the following provinces
- Ontario
50,000,000 (50%)
- Alberta
50,000,000 (50%)
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2. Selected Listed Financial Institution (SLFI) Rules
Example – Single Pension Entity
Facts
• GST (or federal component of HST paid) on actual & deemed supplies
- Actual
- Deemed
- Total
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$25,000 ($15,000 post-June 2010)
$25,000
$50,000
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2. Selected Listed Financial Institution (SLFI) Rules
Example – Single Pension Entity
SAM Formula
SAM Adjustment =
=
=
[A – B] x C x D/E - F +/- G
[$15,000* -0] x 50% x 8%/5% - $24,000 +/- G
- $12,000- +/- G
* $10,000 GST incurred on supplies pre-July 1, 2010 are
excluded from SAM calculation
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2. Selected Listed Financial Institution (SLFI) Rules
Example – Single Pension Entity
PART D
ANNUAL
Line 020
GST and Federal Part of HST Paid
_________
Line 021
ITCs
_________
Line 022
Unrecoverable GST/Fed HST (L.20-21)
_________
Line 023
PAP for 7% province (BC)
_________
Line 024
Fed Tax attributable to BC (L.22x23)
_________
Line 025
Prov. HST attrib. to BC (L24 x 7/5)
_________
Line 026
Sum of PAP for 8% provs. (ON/NB/NF)
_________
Line 027
Fed Tax attrib. to 8% provs. (L. 22x26)
_________
Line 028
Prov. HST attrib. to 8% provs. (L.27 x 8/5)_________
Lines 029- 31 Repeat for Nova Scotia
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_________
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2. Selected Listed Financial Institution (SLFI) Rules
Example – Single Pension Entity
PART D
ANNUAL
Line 020
GST and Federal Part of HST Paid
$15,000 (A)
Line 021
ITCs
$0
Line 022
Unrecoverable GST/Fed HST (L.20-21)
$15,000 (A-B)
Line 023
PAP for 7% province (BC)
_________
Line 024
Fed Tax attributable to BC (L.22x23)
_________
Line 025
Prov. HST attrib. to BC (L24 x 7/5)
_________
Line 026
Sum of PAP for 8% provs. (ON/NB/NF)
_________
Line 027
Fed Tax attrib. to 8% provs. (L. 22x26)
_________
Line 028
Prov. HST attrib. to 8% provs. (L.27 x 8/5)_________
Lines 029- 31 Repeat for Nova Scotia
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(B)
_________
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2. Selected Listed Financial Institution (SLFI) Rules
Example – Single Pension Entity
PART D
ANNUAL
Line 020
GST and Federal Part of HST Paid
Line 021
ITCs
_$0_____
Line 022
Unrecoverable GST/Fed HST (L.20-21)
_$15,000_
Line 023
PAP for 7% province (BC)
_0%_(C)_
Line 024
Fed Tax attributable to BC (L.22x23)
_$0_____
Line 025
Prov. HST attrib. to BC (L24 x 7/5)
_$0_____
Line 026
Sum of PAP for 8% provs. (ON/NB/NF)
________
Line 027
Fed Tax attrib. to 8% provs. (L. 22x26)
________
Line 028
Prov. HST attrib. to 8% provs. (L.27 x 8/5)________
Lines 029- 31 Repeat for Nova Scotia
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$15,000 .
________
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2. Selected Listed Financial Institution (SLFI) Rules
Example – Single Pension Entity
PART D
ANNUAL
Line 020
GST and Federal Part of HST Paid
__$15,000_
Line 021
ITCs
__0______
Line 022
Unrecoverable GST/Fed HST (L.20-21)
__ $15,000_
Line 023
PAP for 7% province (BC)
__0%_____
Line 024
Fed Tax attributable to BC (L.22x23)
__$0_____
Line 025
Prov. HST attrib. to BC (L24 x 7/5)
__$0_____
Line 026
Sum of PAP for 8% provs. (ON/NB/NF)
__50%____
Line 027
Fed Tax attrib. to 8% provs. (L. 22x26)
__$7,500__
Line 028
Prov. HST attrib. to 8% prov. (L.27 x 8/5) __$12,000_
Lines 029- 31 Repeat for Nova Scotia
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__$0_____
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2. Selected Listed Financial Institution (SLFI) Rules
Example – Single Pension Entity
ANNUAL
Line 32
Total PHST Attributable (L. 25+28+31)
Line 33
PHST paid or payable (excludes deemed) __$24,000_(F)
Line 34
Net PHST before adjustments (L.32-33) __($12,000)
Line 35
Positive prescribed adjustment (Gs)
_________
Line 36
Total net PHST (L 34+35)
_________
Line 37
Negative prescribed adjustments (Gs)
_________
Line 38
Total net PHST (L.36 less 37)
_________
Line 39
Net Tax Adjustment Transfer Amount
_________
Line 40
Balance after net tax adjustment transfer _________
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__$12,000_
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2. Selected Listed Financial Institution (SLFI) Rules
Example – Single Pension Entity
ANNUAL
Line 32
Total PHST Attributable (L. 25+28+31)
Line 33
PHST paid or payable (excludes deemed) __$24,000_
Line 34
Net PHST before adjustments (L.32-33) __($12,000)
Line 35
Positive prescribed adjustment (Gs)
__$0_____
Line 36
Total net PHST (L 34+35)
__($12,000)
Line 37
Negative prescribed adjustments (Gs)
_________
Line 38
Total net PHST (L.36 less 37)
_________
Line 39
Net Tax Adjustment Transfer Amount
_________
Line 40
Balance after net tax adjustment transfer _________
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__$12,000_
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2. Selected Listed Financial Institution (SLFI) Rules
Example – Single Pension Entity
ANNUAL
Line 32
Total PHST Attributable (L. 25+28+31)
Line 33
PHST paid or payable (excludes deemed) __$24,000_
Line 34
Net PHST before adjustments (L.32-33) __($12,000)
Line 35
Positive prescribed adjustment (Gs)
__$0_____
Line 36
Total net PHST (L 34+35)
__($12,000)
Line 37
Negative prescribed adjustments (Gs)
__? _____
Line 38
Total net PHST (L.36 less 37)
_________
Line 39
Net Tax Adjustment Transfer Amount
_________
Line 40
Balance after net tax adjustment transfer _________
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__$12,000_
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2. Selected Listed Financial Institution (SLFI) Rules
Example – Single Pension Entity
Calculation of Line 37
Adjustments – G in SAM formula
• Two key G components for pension plans – para’s 49(a) and 49(b)
(a) Provincial component of Pension Plan Rebate (G1-G6)
(b) Adjustment re: Prov. Factor on Deemed Supplies (G7-G12)
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2. Selected Listed Financial Institution (SLFI) Rules
Example – Single Pension Entity
(a) Provincial component of Pension Plan Rebate
=
G1-(G2-G3) x G4 x G5/G6
◦
◦
G1 Provincial HST on TAN = $12,000
G2 Portion of Rebate received ($13,200) + federal component of
TAN ($25,000) = $38,200
G4to G6 Gross up calculation = -$30,560
Net adjustment = - $18,560
◦
◦
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2. Selected Listed Financial Institution (SLFI) Rules
Example – Single Pension Entity
(b) Adjustment re: Prov. Factor on Deemed Supplies (G7-G12)
=
◦
◦
◦
◦
[(G7-G8) x G9 x (G10/G11)]- G12
G7 Federal Tax on Deemed supplies = $25,000 (full year)
G9 to G11 Gross up calculation = $20,000
G12 Provincial Component of Deemed Tax = $12,000
Net adjustment = + $8,000
Sum of adjustments (a) plus (b)
= -$18,560 + $8,000 =-$10,560
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2. Selected Listed Financial Institution (SLFI) Rules
Example – Single Pension Entity
ANNUAL
Line 32
Total PHST Attributable (L. 25+28+31)
Line 33
PHST paid or payable (excludes deemed) __$24,000_
Line 34
Net PHST before adjustments (L.32-33) __($12,000)
Line 35
Positive prescribed adjustment (Gs)
__$0_____
Line 36
Total net PHST (L 34+35)
__($12,000)
Line 37
Negative prescribed adjustments (Gs)
___?______
Line 38
Total net PHST (L.36 less 37)
_________
Line 39
Net Tax Adjustment Transfer Amount
_________
Line 40
Balance after net tax adjustment transfer _________
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__$12,000_
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2. Selected Listed Financial Institution (SLFI) Rules
Example – Single Pension Entity
ANNUAL
Line 32
Total PHST Attributable (L. 25+28+31)
Line 33
PHST paid or payable (excludes deemed) __$24,000_
Line 34
Net PHST before adjustments (L.32-33) __($12,000)
Line 35
Positive prescribed adjustment (Gs)
__$0_____
Line 36
Total net PHST (L 34+35)
__($12,000)
Line 37
Negative prescribed adjustments (Gs)
__$ 10,560
Line 38
Total net PHST (L.36 less 37)
__($22,560)_
Line 39
Net Tax Adjustment Transfer Amount
____0_____
Line 40
Balance after net tax adjustment transfer __($22,560)
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__$12,000_
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2. Selected Listed Financial Institution (SLFI) Rules
Example - Single Pension Entity
Part E GST494
If have positive adjustment – enter in line 104
If have negative adjustment – enter in line 107
Complete lines 108, 109
If you choose to report pension rebate on GST 494, enter pension rebate
amount (federal portion only) on line 111
Complete line 113A, 113B, 115, and 118 or 119 as appropriate
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2. Selected Listed Financial Institution (SLFI) Rules
Consolidated Filing
• Calculation is identical for each pension trust
• Recommend creating spreadsheet – each column representing pension
entity.
• For example, if have 5 pension trusts, set up 6 column spreadsheet
with 6th column being a total column.
• Enter data from 6th column in GST 494
• Percentage lines (e.g., PAP) – calculate backwards from summed data
below.
• Use these percentages to enter in tables in Part F.
• When receive refund, use data from spreadsheet to allocate to
individual pension trusts.
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Summary
Pension Rebate
• Overview of pension rebate rules
• Completion of form RC4607 rebate application
• File ASAP, before June 30, 2013
GST/HST Return for SLFIs
• Overview of SLFI rules
• Completion of form GST494 GST/HST Final Return for SLFIs
• File by June 30, 2011
Questions
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Brian Wurts
+1 416 869 2345
[email protected]
Jason Cooper
+1 416 869 2306
[email protected]
Adam O’Connor
+1 416 941 8496
[email protected]
This publication has been prepared for general guidance on matters of interest only, and does
not constitute professional advice. You should not act upon the information contained in this
publication without obtaining specific professional advice. No representation or warranty
(express or implied) is given as to the accuracy or completeness of the information contained
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members, employees and agents do not accept or assume any liability, responsibility or duty of
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information contained in this publication or for any decision based on it.
© 2010 PricewaterhouseCoopers LLP. All rights reserved. In this document, “PwC” refers to
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