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FIs - Get a Head Start on GST/HST Returns

FIs - Get a Head Start on GST/HST Returns

Financial institutions should prepare for their upcoming GST/HST and QST final returns.


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Although selected listed financial institutions (SLFIs) with a December 31 year-end have until June 30, 2018 to file their GST/HST and QST final return, these returns are complicated and require the reporting of information that may be difficult to extract from financial data systems. By starting to prepare this return early, SLFIs will have time to obtain the required information, and perform a review to identify compliance issues and potential reductions of tax costs.

Over the years, many SLFIs have discovered that they could have claimed additional ITCs and rebates in returns they already filed. Getting an early start on preparing these annual returns may help identify missed ITCs and rebates and allow time to produce appropriate documentation to claim those amounts.

While investment limited partnerships (ILPs) that elect to become SLFIs as of January 1, 2018 will only have to file their first SLFI GST/HST final return by June 30, 2019, they should also prepare early. These ILPs may need to adjust their systems and processes to ensure they have all the required information to file their first SLFI GST/HST final return. For more information on recent changes for general partners and ILPs, see TaxNewsFlash-Canada 2018-07, "2018 Federal Budget - Focus on FIs" and TaxNewsFlash-Canada 2018-17, "General Partners of ILPs - Remit GST by March 31".

Start 2017 return early
To prepare their annual 2017 SLFI GST/HST and QST final return, SLFIs should carefully:

  • Cross-check the amounts in the return with amounts appearing on other returns submitted to the tax authorities and regulatory authorities 
  • Review their 2015 GST/HST and QST final return for any missed credits
  • Review their ITC allocation methods and determine if adjustments are required and how methods may be adjusted.

Background - What is a SLFI?
In general, a SLFI is a listed financial institution that has a permanent establishment, as defined in the GST/HST SLFI regulations, in an HST-participating province and a permanent establishment in another province. Similar rules apply for QST purposes. A listed financial institution includes many entities, such as investment plans (e.g., pension plans and master trusts), credit unions, insurers and segregated funds of insurers.

Annual SLFI final return
All SLFIs across Canada with a December 31 year-end must file an annual GST/HST and/or QST final return for SLFIs by June 30, 2018 regardless of whether they are registered for GST/HST and/or QST purposes (i.e., form GST494, "Goods and Services Tax/Harmonized Sales Tax (GST/HST) Final Return for Selected Listed Financial Institutions" or form RC7294 "Goods and Services Tax/Harmonized Sales Tax (GST/HST) and Quebec Sales Tax (QST) Final Return for Selected Listed Financial Institutions").

As a reminder, the CRA now applies non-compliance holds on refunds to all GST/HST registrants that have any outstanding tax returns. For details, see Canadian Tax Adviser, "CRA to Put Holds on Refunds for GST Non-Compliance", dated April 25, 2017.

Final return - Review information and calculations
In general, the special attribution method (SAM) is a complicated formula that SLFIs must use to calculate an adjustment to their net tax, which then must be included in their annual SLFI GST/HST final return. Similar rules apply for QST purposes. SLFIs may wish to review the following key considerations as they prepare to meet their upcoming filing obligations:

  • Are you tracking all the GST, the federal component of the HST and QST paid or payable in your systems?
  • Do you have any missed eligible ITCs for years 2015, 2016 and 2017?
  • Did you review and recalculate your provincial attribution percentage for each HST-participating province and for Quebec? 
  • Did you make any new GST/HST or QST elections that may affect your SAM adjustment?
  • Did you carefully review the transactions between closely related entities and how they may affect your SAM calculations?
  • Did you adjust the recapture rate for ITC under the Ontario HST?
  • Did you ensure that prescribed amounts were not included in the GST/HST and QST SAM calculations (e.g., claims related costs)?
  • Did you capture any missed PVAT or QST?

Review ITCs allocation - Don't miss deadline
For certain SLFIs, June 30, 2018 is the last day to change the ITC allocation method for 2017 to help reduce unrecoverable GST/HST and QST costs (i.e., before filing their first return for the particular year). This deadline applies to SLFIs with annual reporting periods that have a December 31 year-end and that are not qualifying financial institutions.

In general, qualifying financial institutions (i.e., certain banks, insurers and security dealers) cannot adjust their allocation methods for the 2017 and 2018 fiscal years. However, qualifying financial institutions can apply for authorization to use or to renew an authorization to use particular allocation methods for their upcoming 2019 fiscal year. To do so, a qualifying financial institution must file an application no later than 180 days before the first day of its 2019 fiscal year.

In either case, all financial institutions should review their ITC allocation methods to identify any additional credits to help reduce their unrecoverable GST/HST and QST costs. These entities should also ensure that they have captured all of their commercial activities, and included GST paid in the proper tax pool to ensure that ITCs are calculated using the proper percentages. Some financial institutions should also consider whether they may benefit from notional ITCs and ITRs related to various special provisions.

We can help
KPMG can help SLFIs determine if they have missed eligible ITCs, ITRs, and other deductions and adjustments. We can assist with indirect tax compliance obligations, including the GST/HST and/or QST final return and, if applicable, the GST/HST and/or QST annual information return for financial institutions. We can also help identify areas where SLFIs may be able to manage certain tax costs.

KPMG's Financial Institutions Indirect Tax Compliance Centre has a team of multi-disciplinary professionals who specialize in indirect tax compliance requirements for the financial services sector. These professionals use sophisticated proprietary compliance software, developed specifically for financial institutions with partially exempt activities, to help extract the required data from systems, fulfill filing requirements and perform checks to help manage compliance indirect tax risks.


For more information, contact your KPMG adviser.


Information is current to April 10, 2018. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500

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2018 Federal Budget — Focus on FIs

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General Partners of ILPs — Remit GST by March 31

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