TRAILING COMMISSIONS NO LONGER EXEMPT?
CRA REVERSES POSITION ON MUTUAL FUNDS TRAILING COMMISSIONS
For decades, mutual fund trailing commissions paid by mutual fund managers to licensed dealers — and by dealers to their agents — were generally treated as consideration for an exempt financial service and therefore not subject to GST/HST. In a GST/HST ruling released on December 22, 2025, however, the Canada Revenue Agency (“CRA”) reversed this longstanding administrative position. A subsequent February 10, 2026 GST/HST Notice confirms and details the CRA’s new position.
Under the revised approach, mutual fund trailing commissions will become taxable effective July 1, 2026. This change will have significant implications for fund managers, dealers, and other stakeholders in the mutual fund industry, and is expected to impose additional GST/HST compliance obligations and burdens.