Are Our Fees Still Taxable? – An Update

In our last issue of Perspective, we commented on this past summer’s court decision involving the Canadian Medical Protective Association and the tax status of some investment services. The outcome of this case suggested that discretionary investment management services might be GST and QST exempt.

It now appears that this will not be the case. In December 2009, Finance Minister Jim Flaherty issued a response that clarified the government’s position. The federal govern-ment has always treated investment man-agement services as taxable for GST purposes, on the grounds that these services do not meet the exemption definition for financial services in the Excise Tax Act.

In order to clear up any uncertainty, the gov-ernment will introduce legislation to reaffirm its longstanding policy and specifically exclude investment management services from the definition of financial services. There will be no rebate of GST or QST paid in the past.