Investment limited partnerships (ILPs) who indirectly invest in real property and qualify as Selected Listed Financial Institutions (SLFIs) for GST/HST purposes must file a GST/HST final return by June 30, 2022. This requirement may affect ILPs in "stacked" partnerships in investment structures. Structures investing in real property should carefully review their entities in order to identify all SLFI ILPs, as well as other entities that may also qualify as SLFIs, and meet all their GST/HST filing obligations. As part of completing and filing their annual SLFI GST/HST final return, SLFI ILPs are required to calculate a complex adjustment to their net tax, which may result in a tax refund or additional tax liability in some situations. Similar rules apply for QST purposes.


Generally, an ILP is a limited partnership whose primary purpose is to invest in financial instruments (i.e., shares and units). The partnership may be considered an ILP where:

  • The partnership is, or forms part of a structure that is, represented or promoted as a collective investment vehicle (e.g., hedge fund, ILP, mutual fund) or
  • A listed financial institution holds 50% or more of the total value of all interests in the partnership.

ILPs are often used in stacked partnerships in investment structures that finance and invest in real estate, along with mutual fund trusts.

Most ILPs qualify as SLFIs as of 2019 (or as of 2018 if the ILP made a related election), and management or administrative services rendered by the general partners to the ILPs are essentially deemed to be taxable supplies under GST/HST rules that were introduced in September 2017.

Meet SLFI filing obligations

In general, SLFI ILPs are required to file a SLFI final return no later than six months after their fiscal year-end, even if they are not registered for GST/HST purposes. As part of this annual return, SLFI ILPs are required to recalculate their tax costs based on the Special Attribution Method (SAM) formula under the GST/HST rules. Similar rules apply for QST purposes.

Tax calculations under the SAM formula

The tax calculations under the SAM formula can be complex and may be affected by certain factors.

Blended rate

The SAM formula determines a SLFI's tax liability for the provincial part of the HST for each participating province by reallocating tax costs to various provinces based on a formula known as the "blended rate". SLFIs use this rate so that they do not have to track the use of their inputs to a particular province.

To calculate the blended rate, ILPs and mutual fund trusts must determine the location of their investors and the amount of their investments. For purposes of determining this location, ILPs and mutual fund trusts may have to consider special rules to calculate investor percentages, including look-through rules to the entities that invest in the SLFI. SLFIs must ascertain the location of their investors as of September 30 of the prior year, or else the investors may be treated as if they are located in the province with the highest HST rate. In addition, where a SLFI has investors that are non-residents of Canada, these investors are generally treated as if they are located in a non-HST province, as long as the SLFI knows the locations of the investors.

Example — Blended rate

ABC LP is a SLFI ILP in Ontario with investors in Ontario holding 75% of the value of the units of the ILP and investors in Alberta holding the other 25%. As a result, ABC LP's blended rate is essentially 11% (i.e., 5% + 6% [75% of 8% HST in Ontario] + 0% (25% allocated to Alberta, a non-HST province)). If ABC LP paid $130,000 of 13% HST on its inputs and did not claim any input tax credits (ITCs), ABC LP would generally be entitled to a refund on its SLFI final return of $20,000. Conversely, if ABC LP paid only 5% GST on its inputs, it would be required to pay an additional $60,000 of tax through its SLFI final return.

Other factors

The tax calculations under the SAM formula may also be affected by other factors that include:

  • The amount of GST/HST paid, including tax paid on supplies from the general partner
  • The amount of ITCs
  • Whether any of the numerous adjustments in the formula apply.

KPMG observation

Taxpayers must ensure that they identify which limited partnerships in their structure qualify as ILPs and determine how the SLFI rules apply to these SLFI ILPs. These rules include additional compliance requirements for SLFI ILPs, under which they must determine the residency and investor percentages of their investors, and use these details to determine their ultimate GST/HST and QST tax liability (or refund) in their completed SLFI returns due June 30. Failing to identify SLFI ILPs could lead to compliance issues and penalties for failure to file the proper GST/HST and QST returns as well as additional tax liabilities or missed refunds.

For more information, contact your KPMG adviser.

Information is current to April 11, 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