Tax Insights: Participating employers must remit GST/HST/QST collected on deemed supplies to pension entities and master pension entities – act now!

Issue 2023-02

In brief

Participating employers with a December 31 year end must remit the Goods and Services Tax/Harmonized Sales Tax (GST/HST) and Quebec Sales Tax (QST) on deemed supplies made to registered pension entities and master pension entities with their December GST/HST and QST returns. Failure to do so could result in the pension entities being ineligible to claim their 33% GST/HST and QST rebates.

To simplify compliance and eliminate the potential for double tax, consideration should also be given to making an election between the employer, the pension entities and the master pension entities to deem actual supplies to have been made for nil consideration.

In detail

Required action for participating employers

Participating employers with December 31 year ends should:

• calculate the GST/HST that is deemed to have been collected under the deemed supply rules, and
• remit the GST/HST with their December 2022 GST/HST returns (generally due by January 31, 2023)

If the GST/HST that is deemed to have been collected under the deemed supply rules is not remitted on time, the pension entities will not be able to claim their GST/HST rebates.

Similar rules apply for pension entities with Quebec members and employers that are registered for QST purposes.

PwC observes

Participating employers that are considered to have made deemed supplies to pension entities and master pension entities should start to gather the information to calculate the deemed GST/HST and QST that they are obliged to report and remit.

A participating employer whose year end is before December 31 should consider filing an amended return to report any deemed tax that was not previously reported and remitted to the Canada Revenue Agency and/or Revenu Québec.

Election between the employer, the pension entity and the master pension entity for actual supplies

A participating employer may elect to deem actual supplies that are made to the pension entity and the master pension entity to be made for nil consideration.

To simplify compliance and ensure that the pension entity and the master pension entity are not subject to double taxation, an election should be filed when a participating employer incurs expenses that are paid for by the pension entity or the master pension entity.

We recommend that all participating employers, pension entities and master pension entities make this election by filing Form RC4615, “Election or Revocation of the Election to Not Account for GST/HST on Actual Taxable Supplies.” 

The takeaway

As pension entities are generally precluded from claiming input tax credits, a number of sales tax considerations for pension plans include whether:

• the pension entity and master pension entity should register for GST/HST and QST
• the pension entity has claimed all eligible pension plan rebates
• the employer has collected and remitted GST/HST and QST on deemed supplies and claimed eligible input tax credits and input tax refunds
• the pension entity and/or master pension entity is a selected listed financial institution that is required to adjust its net tax pursuant to the “special attribution method” formula and file Form RC7294/Form GST494
• the pension entity and/or master pension entity is required to self-assess GST/HST on imported taxable supplies
• there are any elections that can be filed to simplify compliance or reduce the amount of unrecoverable GST/HST or QST that is payable