As we anticipated in our most recent edition of Pensions@Gowlings, the Department of Finance has announced legislative changes that will reverse the decision of the Federal Court of Appeal inHer Majesty the Queen v. The Canadian Medical Protective Association (the "CMPA Decision") from earlier this year. In the CMPA Decision, the Court had found that investment management services provided to CMPA were exempt from GST/HST as a service of "arranging for" a "financial service".

Investment management services, including discretionary investment management services, will be GST/HST taxable going-forward. In addition, these services will be subject to GST/HST where the investment manager charged GST/HST. Since nearly all investment managers continued to charge GST/HST on their services following the CMPA Decision, the result is that the legislative changes are, practically speaking, retroactive to the introduction of the GST in 1991. Plans and employers that have applied for a refund of tax paid in error on investment advisory services can expect their applications to be denied by the Canada Revenue Agency in due course.