Goods and Services Tax (GST) amendments for financial institutions

Develop strategies for impending changes to GST treatment of financial services

Canada's Ministry of Finance has proposed a range of Goods and Services Tax (GST) amendments that will affect financial institutions. Although Parliament has not enacted the amendments yet, they may have a retroactive effect.

The proposed new rules will:

• Broaden the base upon which financial institutions self-assess tax in relation to imported taxable supplies
• Amend the input tax credit allocation regime by introducing prescribed methodologies and specified recovery percentages for qualifying institutions, which are generally less favourable than the current approach
• Require most financial institutions to complete an annual information schedule (AIS) detailing a comprehensive breakdown of items such as revenue, expenditures, GST collected and paid on imported services and input tax credit allocation methodologies

Many of the proposed amendments to the GST treatment of financial services will affect all financial institutions and require specific compliance action. Since the changes may have a retroactive affect, financial institutions must know their compliance obligations. Institutions that have not considered the impact of the amendments before their enactment should consider remedial action.

How PricewaterhouseCoopers can help

PricewaterhouseCoopers' Indirect Tax Services team offers a comprehensive review of your current level of compliance with the Goods and Services Tax (GST) treatment of transactions involving financial services, as well as an assessment of the potential impact of the proposed rules. Our services include:

• Reviewing your self-assessment of GST related to expenses incurred outside Canada
• Evaluating your institution's current input tax credit allocation methodology and development of systems to comply with the new input tax credit allocation regime
• Assisting with completion of the AIS

Contact a member of our Indirect Tax team to learn more about the potential amendments.