GST/HST On Portfolio Management Fees - New Legislative Proposals

On December 14, 2009, the Department of Finance released a backgrounder containing legislative proposals in response to the recent Federal Court of Appeal decision The Queen v. The Canadian Medical Protective Association ("CMPA")¹ rendered in April 2009.

The CMPA Decision

In CMPA, the Federal Court of Appeal found that discretionary investment management services rendered through the management of either segregated or pooled funds were exempt "financial services" that should not be subject to GST/HST. In particular, the Court ruled that discretionary investment management services are directed at the "transfer of ownership or repayment of a financial instrument" and to the "arranging for" such services within the meaning of paragraphs 123(1)(d) and (l) of the term "financial service" in the Excise Tax Act (Canada) (the "Act"), and are therefore exempt from GST/HST under the Act. As a result, the Court concluded that such services do not constitute the "service