Limited Partnership Distributions May Be Subject To GST/HST

The Department of Finance (Canada) released draft legislation to the Excise Tax Act (Canada) to, essentially, make certain distributions to a general partner of an "investment limited partnership" subject to GST/HST.

Under the current rules, distributions made to a general partner of a limited partnership are not subject to GST/HST if the general partner's activities are made in the course of the partnership's activities. The draft legislation deems management or administrative services provided by the general partner not to be made in the course of the partnership's activities. Therefore payments to the general partner for management or administrative services will be subject to GST/ HST. However, the draft legislation applies only in respect of distributions made to general partners of "investment limited partnerships". Under the draft legislation, "investment limited partnership" is defined as: