Many financial institutions are required to file an annual GST/HST final return by June 30, 2022. This deadline affects financial institutions, including investment limited partnerships (ILPs) and pension plans, that qualify as selected listed financial institutions (SLFIs) for GST/HST purposes and have a December 31 year-end. In light of this upcoming deadline, corporate groups should review their structures and identify these SLFI entities and ensure they file all the required GST/HST and QST returns. Entities are generally required to recalculate their total GST/HST for the year as part of this filing obligation, and could be eligible to recover tax costs in certain circumstances, depending on whether they paid GST or HST through the year. Similar rules apply for QST purposes.
It's a good idea to get a head start on these returns to ensure they are accurate. The CRA continues to closely review these returns, including cross-referencing the self-assessment obligations with details on other reports (e.g., transfer pricing and other income tax filings).
SLFIs — Annual GST/HST and QST final returns
Financial institutions that qualify as SLFIs must file the annual GST/HST and QST final return within six months after their year-end. SLFI entities that have a December 31 year-end must file their final returns by June 30, 2022 for their 2021 fiscal year. In general, a financial institution qualifies as a SLFI if it has a permanent establishment in an HST province and in another province for GST/HST purposes, or in Quebec and in another province for QST purposes. SLFIs must determine which GST/HST rules apply to their specific facts and circumstances to determine whether they have a permanent establishment in a particular province.
SLFIs must also consider various factors when calculating tax adjustments for these returns, such as their specific type of entity and activities. In preparing their GST/HST and QST filings, SLFIs may want to:
- Determine whether their systems separately track GST, the federal component of the HST and QST paid or payable
- Review allocation methods under the GST/HST and QST SLFI rules
- Identify any missed eligible input tax credits (ITCs) for years 2019, 2020 and 2021
- Determine whether they have any new operations or service lines that may affect ITC allocation methods
- Identify any significant business acquisitions over the past year
- Determine whether they have any new, actual or deemed, permanent establishments in any provinces over the past year
- Review transactions between related entities and the cost/benefit of any elections in place
- Cross-check all the information against details provided to the tax and regulatory authorities in other filings, before filing returns.
When preparing their final returns, SLFIs should carefully review all their allocation methods under the special attribution method (SAM). In general, the SAM is a complex formula that SLFIs must use to calculate an adjustment to their net tax that is included in their annual SLFI GST/HST final return. The SAM essentially recalculates the entity's tax costs based on special rules that determine where it operates. These calculations take into account various criteria for different types of entities. Similar rules apply for QST purposes. In some cases, an error in the allocation methods may translate into a tax recovery or an additional amount of tax to pay for current and prior reporting periods.
Review self-assessment obligations
Financial institutions should also review and confirm that they are fulfilling all their self-assessment obligations. Because the GST/HST and QST self-assessment rules are complex and can vary based on an entity's various operations, affected businesses may benefit by preparing their GST/HST and QST annual returns early and reviewing their self-assessment obligations in detail.
We can help
KPMG's Financial Institutions Indirect Tax Compliance Team, composed of multi-disciplinary professionals who specialize in indirect tax compliance, can assist you with your indirect tax compliance obligations, including the preparation or review of your 2021 GST/HST and QST final return and annual information return.
We can also help you:
- Identify issues and opportunities through data analytics
- Simplify the preparation of your returns
- Determine whether you have missed eligible ITCs, input tax refunds (ITRs), and other deductions and adjustments
- Provide assistance to manage GST/HST and QST risks
- Identify areas where entities may be able to proactively reduce GST/HST and QST costs as well as compliance risks on an ongoing basis.
For more information, please contact your KPMG adviser or one of the following Indirect Tax professionals:
Information is current to March 14, 2022. 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.