The Tax Court of Canada's recent decision in Invesco
Canada Ltd. v. The Queen1 confirms that GST applies
only to the net management fees paid by a mutual fund trust to its
fund manager where the normal management fees are reduced, at the
discretion of the manager, as a special distribution paid directly
by the mutual fund trust to "large investors" such as
pension funds and other sophisticated investors.
Facts and background
Invesco Canada Ltd. ("Appellant") provides management
services to various mutual fund trusts (the "Funds"), for
which it charges management fees that are fully taxable from a GST
standpoint. Typically, a manager will base the fees that it charges
for managing the day-to-day business activities of a fund on the
value of all of the managed assets. However, in order to attract
pension funds and other large sophisticated investors (the
"Large Investors"), managers generally agree to reduce
the management fees that apply with respect to their
