Tax Insights: GST/HST and QST alert ─ Investment plans are required to obtain investor percentages – action required by October 15, 2024

Issue 2024-29

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 DIP, specified investor, selected investor, qualifying investor or an investor of another class that is not separately referenced in the information sharing rules provided in section 52 of the Selected Listed Financial Institutions Attribution Method (GST/HST) 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 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 and, as such, are not a “specified investor.”

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

• its investor percentage for every HST participating province and Quebec as of September 30, 2024, and
• the number of units held on September 30, 2024 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, 2024, and
• the number of units held on September 30, 2024 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 generally a Canadian resident 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 of September 30, 2024, and
• the number of units held on September 30, 2024 in the DIP and, if applicable, in each series of the plan

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 a 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 either:

• a SLFI
• an investment plan that is neither a qualifying small investment plan (QSIP) nor a “qualifying private investment plan” (i.e. a private investment plan, a registered pension plan or a master pension entity that, in the preceding year, had: (i) less than 10% of its plan members residing in the HST provinces, and (ii) the value of its assets or actuarial liabilities attributable to members residing in the HST provinces of less than $100,000,000)
• 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

Most pension plans, unless they are relatively small or 90% of their members reside in non‑HST provinces, will be a “qualifying investor” or an institutional investor and thus required to provide their investor percentage. Written requests are not required to be sent to qualifying investors. Rather, qualifying investors must voluntarily provide DIPs the required information by November 15, 2024. However, we recommend that qualifying investors be sent the requisite request to ensure full compliance.

Required information from securities dealers 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, 2024, 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, 2024

Timing

DIPs must know where their unitholders resided (or their “investor percentages”) by December 31 of the particular year. However, when DIPs send their information requests by October 15, 2024, relieving rules can apply if the DIP does not receive the requisite information from all their investors; therefore, it is strongly recommended that the information request be sent by October 15, 2024. 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 from the preceding year (i.e. September 30, 2023 is the attribution point for the 2024 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, 2023, we suggest that the DIP makes an election for 2024 that allows it to use September 30, 2024 as its attribution point for 2024, so that it can obtain the required information before December 31, 2024.

The takeaway

Investment plans should issue the information requests to investors and securities dealers by October 15, 2024, 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.}