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GOODS AND SERVICES TAX (GST) - Financial services - Exempt supplies

Thursday, September 26, 2019 @ 8:21 AM  


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Appeal by SLFI Group and the other appellants from a judgment of the Tax Court that dismissed their appeal from assessments of goods and services tax (GST). The appellants, mutual funds and their manager, appealed from assessments of GST in respect of a third-party funding arrangement. The arrangement was undertaken to facilitate the payment of commissions due to brokers on the purchase of investments in the appellants. The Minister of National Revenue issued assessments with respect to the arrangement that imposed GST on the earned fees payable by the appellants on the basis that the earned fees were consideration for an imported taxable supply. Between 2007 and 2010, the manager self-assessed tax on behalf of the other appellants and paid $14 million in GST. The Minister assessed those amounts. The aggregate amount of tax assessed for the relevant reporting periods, from 2002 to 2011, was $45 million. The Tax Court concluded the appellants were required to self-assess GST in respect of the arrangement on the basis that they received an imported taxable supply. It found the supply was a financial service but was excluded as a financial service as a management or administrative service.

HELD: Appeal allowed in part. The Tax Court erred in concluding the appellants were required to self-assess GST in respect of the arrangement. The Tax Court did not err in finding there was a supply but erred in finding there was a taxable supply. The service provided to the appellants was an exempt supply of a financial service and not a management or administrative service. The appellants were not entitled to rebates of the tax paid from 2007 to 2010. The exclusion in s. 261(2)(b) of the Excise Tax Act applied, given the tax had been assessed. A notice of objection should have been filed to preserve the right to recover the tax, which was not done.

SLFI Group – Invesco Canada Ltd. v. Canada, [2019] F.C.J. No. 944, Federal Court of Appeal, J.D.D. Pelletier and D.W. Stratas JJ.A. and J.M. Woods A.C.J., August 9, 2019. Digest No. TLD-September232019011