Not part of the transitional rules for GST/HST but still a hot topic is whether or not investment management fees are subject to GST and after June 30th, HST in Ontario.

GST on Investment Management Fees –  

To provide background, in 2009 there were two court cases involving GST and investment management services which included a ruling that investment management services were exempt from GST under the definition of financial services. Prior to this ruling, investment advisors have typically charged GST on their services as a taxable activity that did not qualify as exempt in accordance with CRA’s administrative policy.

As a result of the rulings, some investment management companies notified their clients of the potential overpayment of GST and in some cases provided Form GST 189- GST/HST General Rebate form to apply for a rebate for GST paid in error.  Generally the firms continued to charge GST on their services in case the government provided retroactive legislation to make these amounts taxable.  Taxpayers who filed rebate applications typically received a letter from CRA acknowledging receipt of the application but holding the rebate in abeyance in anticipation of retroactive legislation.  

As expected, the retroactive legislation has arrived and clarified that investment management fees are not considered exempt financial services and are subject to GST or HST.  Investment management firms should ensure that they are charging GST on these amounts and investors should expect any rebates to be denied.  Where these costs are allowed as a deduction, as in the case of a non-registered account, taxpayers should be sure to deduct the cost of the investment management fees plus GST.