Tax Insights: GST/HST and QST alert: Investment plans are required to obtain investor percentages – action required by October 15, 2019

Issue 2019-31

In brief

Distributed investment plans (DIPs), which include investment limited partnerships, that are a selected listed financial institution (SLFI) are required to obtain information from investors to determine the plan’s provincial attribution percentage, so that the plan's GST/HST and QST liabilities can be calculated. Exchange-traded funds (ETFs) and exchange‑traded series are excluded from this requirement.

This requires investment plans to make written requests to investors and securities dealers. The information required from the investor depends on the particular type or class of investor and, in particular, whether the investor is a specified investor, selected investor, qualifying investor or an investor of another class that is not separately referenced in the information sharing rules provided in the SLFI Regulations. A summary of the information requirements follows.

In detail

Required information from institutional investors (other than individuals, DIPs or specified investors)

This category of investor is generally limited to institutional investors that hold units in a particular plan (or, if the plan is a stratified investment plan, hold units in a particular series) with a value of $10,000,000 or more.

Upon receipt of a written request from the plan, the unit holder (other than an individual, a DIP or a specified investor) must provide the plan with:

• its investor percentage for every HST participating province and Quebec as of September 30, 2019, and
• the number of units held on September 30, 2019, in the DIP and, if applicable, in each series of the plan

Required information from selected investors (other than qualifying investors)

A selected investor is a person that is neither an individual nor a DIP and that holds units of the particular investment plan (or, if the plan is a stratified investment plan, holds units in a series of the plan) with a total value of less than $10,000,000.

Upon receipt of a written request from the plan, a selected investor must provide the plan with:

• its address that determines its province of residence as at September 30, 2019, and
• the number of units held on September 30, 2019, in the DIP and, if applicable, in each series of the plan

Required information from DIPs (other than qualifying investors)

Upon receipt of a written request from the plan, a DIP must provide the plan with:

• its investor percentage for every HST participating province and Quebec as of September 30, 2019, and
• the number of units held on September 30, 2019, in the DIP and, if applicable, in each series of the plan

Required information from persons that sell or distribute units of the plan

Upon receipt of a written request from the plan, securities dealers that sell or distribute units in the plan must provide the plan with:

• for each HST participating province and Quebec, the number of units of the plan and, if applicable, in each series of the plan held by its clients that are resident in the HST participating province or Quebec as of September 30, 2019, and
• the total number of units of the plan and, if applicable, in each series of the plan, held by clients resident in Canada as of September 30, 2019

Qualifying investors

A qualifying investor is generally an investor that is an investment plan (but not a DIP) that holds less than $10,000,000 in units in the DIP (or, if the plan is a stratified investment plan, holds less than $10,000,000 in units in a series of the plan) and is:

• a person that is not a qualifying small investment plan (QSIP) or a pension plan whose members reside almost exclusively in non-HST provinces for GST/HST purposes (or exclusively outside Quebec for QST purposes) or a private investment plan
• a SLFI, or
• a member of an affiliated group, the members of which together hold units with a total value of at least $10,000,000 or which includes a member that is a SLFI

Written requests are not required to be sent to qualifying investors. Rather, qualifying investors must voluntarily provide DIPs the required information by November 15, 2019. However, we recommend that qualifying investors be sent the requisite request to ensure full compliance.

Timing

DIPs must know where their unitholders resided or their “investor percentages” by December 31 of the particular year; however, as there are relieving rules that can apply if the information request is sent by October 15, 2019, it is strongly recommended that the information request be sent by this date. The person receiving this request has 45 days to respond to it.

Current year election

Generally, DIPs determine their provincial attribution percentage based on the default attribution point (i.e. September 30, 2018 for the 2019 year) and they must know where their unitholders resided or their “investor percentages” by December 31 of the particular year. To the extent that a DIP did not know, by December 31, 2018, where its unitholders resided or its “investor percentages” at the default attribution point (i.e. September 30, 2018), we suggest that the DIP makes an election for 2019 that allows it to use September 30, 2019 as its attribution point for 2019 so that it can obtain the required information before December 31, 2019.

The takeaway

Investment plans should issue the information requests to investors and securities dealers by October 15, 2019, to ensure all the required information is received on a timely basis.