See Also
Canadian Imperial Bank of Commerce v. The Queen, 2018 TCC 109, rev'd 2021 FCA 10
The CIBC issued Visa credit cards and utilized a credit card payment system operated and managed by Visa Canada. Visa Canada essentially acted as a largely automated go-between between the “issuer,” who provided the funds for a purchase at a merchant by a cardholder, and the “acquirer,” who used such funds to pay the merchant. Visa Canada added $18M in GST or HST to its charges for its services to CIBC in the years in question, and CRA denied CIBC’s s. 261 rebate claim therefor. Before finding that the supply by Visa Canada was a prescribed supply under para. (t) of “financial service,” Rossiter CJ found that Visa Canada was supplying a service described in para. (i), and that s. (q.1) did not apply, stating (at paras. 105-106):
[A]sset management services are a fairly active process where the underlying portfolio of financial assets/liabilities, through the efforts of the asset manager, are created, optimized or otherwise changed in some way.
In contrast, the liabilities incurred by CIBC are not created by Visa as Visa is not responsible for the issuing of the credit card. These liabilities are also not altered in anyway by the services provided by Visa, with Visa merely facilitating the transfer of funds between CIBC and the intended recipients of the funds for which the liabilities were incurred for. Section (q.1) does not appear to be applicable.
Administrative Policy
22 December 2025 GST/HST Interpretation 246664 - Tax status of trailing commissions
CRA responded to a submission that GST/HST did not apply to dealer trailing commissions earned by a dealer (the “New Dealer”) who is not the dealer (the “Original Dealer”) who arranged the sale and issuance of the subject mutual fund trust units or shares (the “Units”).
In summarizing its previous position, it stated:
As noted in Excise and GST/HST News #111 issued in June 2022, CRA’s previous position had been that where a Dealer was not the same person that facilitated the initial sale of shares or units in the fund (i.e., a New Dealer) but received a trailing commission in respect of those shares or units, the trailing commission was consideration for a separate supply from the supply of arranging for the initial sale of shares or units. Unless the service provided by the New Dealer in these circumstances fell within the financial services definition, the trailing commissions would attract GST/HST. Where the Dealer received the trailing commission for the servicing of an investor's account, this was not a supply of a financial service as defined in the ETA.
It stated that it had now revised its position:
Effective July 1, 2026, mutual fund trailing commissions paid by [mutual fund] Managers to both Original Dealers and New Dealers will generally be subject to GST/HST.
It stated that this revised position arose from its review, which suggested that “Dealers do generally provide ongoing services to their clients in exchange for the trailing commissions they receive”, so that the “collective provision of investment account support, servicing and advice in this context generally constitutes an asset management service for GST/HST purposes”. Among other factors:
- It appeared that Dealers had ongoing regulatory and client-related obligations, for which the trailing commissions were intended to compensate, i.e., for ongoing services and/or advice.
- Consistent with this, as a result of the CSA amendments to National Instrument 81-105 (effective June 1, 2022), Managers are generally now prohibited from paying trailing commissions to Dealers of record who are not obliged (by industry rules) to make suitability determinations in connection with a client’s purchase and ongoing ownership of the particular Units.
- A number of larger Dealers and their agents that supply ongoing investment account services to small- or medium-sized personal investors have begun to compute their account fees based on a percentage of assets under management (rather than charging on a per-trade basis) with such charges excluding the value of mutual funds generating trailing commissions, on the basis that the Dealers should not be paid twice for performing the same asset management service (i.e., the Dealers themselves view the service supplied in exchange for trailing commissions to be one of asset management).
CRA further stated that its new position “simplifies tax administration”:
Managers will no longer be required to track the transfer of units to New Dealers (i.e. distinguish between payments to Original Dealers versus New Dealers) in order to apply GST/HST correctly to the trailing commissions paid. Note that arranging for the initial issuance of units remains an exempt supply, so any up-front trading fees earned by Dealers are not subject to GST/HST.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Financial Service - Paragraph (l) | MFT trailer fees are taxable even if paid to originating dealer | 373 |