Distributed investment plans, such as mutual fund trusts and investment limited partnerships, should act now to request essential information from their investors by October 15, 2024. Under the GST/HST and QST information sharing rules, these plans are required to collect specific investor details to correctly calculate their tax liabilities and determine whether they can benefit from particular elections. Failing to make these requests can result in higher GST/HST and QST costs, which may negatively impact the annual performance of the plans.
Both investors and securities dealers also have obligations to meet under these rules. Investors who receive requests from distributed investment plans are required to provide certain details in writing. In some cases, investors must provide this information even if they have not received a request. Non-compliance with these requirements can lead to penalties under the GST/HST and QST regimes.
Background
Distributed investment plans, classified as selected listed financial institutions (SLFIs) under the GST/HST and QST rules, must annually request specific details from investors. These details help plans calculate their provincial attribution percentages and manage indirect tax costs, ensuring compliance with GST/HST and QST regulations.
In 2022, 2023, and 2024, the government proposed changes to the GST/HST rules, which may affect the SLFI status and investor obligations. Distributed investment plans and investors should carefully review these proposals to understand how they might impact their tax responsibilities.
Key Deadlines for Distributed Investment Plans
Distributed investment plans, including mutual fund trusts, mortgage investment corporations, unit trusts, segregated funds, and other investment vehicles, must send written requests to investors by October 15, 2024. The requested information must be collected by December 31 to manage tax costs and ensure compliance.
Failure to collect this information can lead to higher indirect tax costs, as distributed investment plans may be forced to allocate certain investors to the highest tax rates of HST-participating provinces (e.g., a 15% tax rate instead of 5%). Missing information from investors could further increase these tax costs.
Investors and Securities Dealers – Key Responsibilities
Investors and securities dealers must provide specific details to distributed investment plans each year under the GST/HST and QST rules. For “selected investors” who receive written requests, information such as addresses and the number of units held must be provided by November 15, 2024, or 45 days after receiving the request.
In addition, “qualifying investors” are required to provide details annually, even if they don’t receive a request from the plan. These details may include notices of qualifying investor status, the number of units held, and investor percentages for HST-participating provinces.
Securities dealers who receive requests must provide information about the units their clients hold in distributed investment plans by the same deadline.
Investors and securities dealers who fail to meet these obligations may face penalties of up to $10,000 or 0.01% of the total value of the units in question.
How ClearWealth Can Help
Navigating the complexities of the GST/HST and QST rules can be challenging, but ClearWealth Accounting Advisors is here to help. Our team of tax experts is ready to assist distributed investment plans, investors, and securities dealers in meeting their compliance obligations. We can help with:
- Tax Liability Reviews: Ensuring that your distributed investment plan meets all information sharing requirements and accurately calculates tax costs.
- Compliance Support: Assisting investors and securities dealers in understanding and fulfilling their obligations under the GST/HST and QST regimes.
- Deadline Management: Helping you stay on top of important deadlines to avoid penalties and minimize tax costs.
Contact ClearWealth today to ensure your investment plan is fully compliant and prepared for upcoming tax obligations.
