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Tax Insights: GST/HST and QST alert: Investment plans are required to obtain investor percentages – action required by October 15, 2021

September 08, 2021

Issue 2021-22

In brief

Distributed investment plans (DIPs)1 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.

Type of investor

Information required

Institutional investors (excluding individuals and specified investors) with investments of $10,000,000 or more

  • Investor percentage on September 30, 2021
  • Number of units held on September 30, 2021

Selected/specified investors (excluding qualifying investors)

  • Business address on September 30, 2021
  • Number of units held in the DIP on September 30, 2021

Securities dealers (other than in an ETF series)

  • Number of units held (per series) on September 30, 2021
  • Number of units held by persons resident in Canada on September 30, 2021

Qualifying investors

  • Notify the DIP of its qualifying investor status
  • Number of units held in the DIP on September 30, 2021
  • Investor percentage on September 30, 2021

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, 2021, and
  • the number of units held on September 30, 2021, 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, 2021, and
  • the number of units held on September 30, 2021, 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, 2021, and
  • the number of units held on September 30, 2021, 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:

  • the number of units of the plan and, if applicable, in each series of the plan held by its clients that are resident in each HST participating province or Quebec as of September 30, 2021, 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, 2021

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, 2021. 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, 2021, 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, 2020 for the 2021 year) and they must know their investor percentages by December 31 of the particular year. To the extent that a DIP did not know its investor percentages at the default attribution point by December 31, 2020, we suggest that the DIP makes an election for 2021 that allows it to use September 30, 2021 as its attribution point for 2021, so that it can obtain the required information before December 31, 2021.

The takeaway

Investment plans should issue the information requests to investors and securities dealers by October 15, 2021, to ensure all the required information is received on a timely basis.

 

1. A "distributed investment plan" means an investment plan that is a mutual fund trust, a mutual fund corporation, a unit trust, an investment limited partnership, a mortgage investment corporation, an investment corporation, a non-resident-owned investment corporation or a segregated fund of an insurer.

 

Contact us

Brent Murray

Brent Murray

Partner, PwC Law LLP

Tel: +1 416 947 8960

Helen Cai

Helen Cai

Senior Manager, PwC Canada

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Mario Seyer

Mario Seyer

Partner, PwC Canada

Tel: +1 514 205 5285

Hubert Cadotte

Hubert Cadotte

Senior Associate, PwC Canada

Tel: +1 514-205-5001 ext. 1584

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