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GST/HST REPRIEVE FOR TRAILING COMMISSIONS

CRA DELAYS GST/HST ENFORCEMENT ON MUTUAL FUND TRAILING COMMISSIONS

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As we have blogged here, the Canada Revenue Agency (“CRA”) previously announced that mutual fund trailing commissions paid by mutual fund managers to licensed dealers — and by dealers to their agents — would become taxable effective July 1, 2026.

However, in May 2026, through an updated GST/HST Notice 344, the CRA delayed enforcement of its new administrative position to January 1, 2028. This is a welcome development for mutual fund managers, dealers, and advisors, but industry participants should use the transition period to prepare for the new GST/HST treatment.

CRA’s Evolving Position on Trailing Commissions

For decades, the CRA took the view that mutual fund trailing commissions were not subject to GST/HST. This longstanding position, however, was reversed in December 2025, when the CRA concluded that recent developments in the mutual fund industry had changed the nature of the services provided by dealers — from arranging the original sale of mutual fund units to providing ongoing support and advice to investors.

On that basis, the CRA announced that mutual fund trailing commissions would become taxable effective July 1, 2026.

CRA Delays Enforcement Until January 1, 2028

Approximately one month before the July 1, 2026 effective date, the CRA advised industry groups that it intended to grant a “material extension” to the implementation timeline for applying GST/HST to mutual fund trailing commissions. Subsequently, in late May 2026, through the updated GST/HST Notice 344, the CRA delayed enforcement of its administrative position to January 1, 2028.

The CRA explained that the purpose of the delay is to give the industry additional time to implement the necessary system changes and procedural adjustments. However, the CRA has encouraged dealers to apply the new tax treatment as soon as possible. The delay is therefore not a reversal of the CRA’s underlying position, but a transition period for industry implementation.

Practical Implications for Industry Participants

The delayed enforcement date gives industry participants more time to prepare for the application of GST/HST to trailing commissions – including registering for GST/HST where necessary. However, this does not mean that GST/HST is irrelevant until January 1, 2028.

Before January 1, 2028, dealers may choose to begin applying the new GST/HST treatment and collect the tax on trailing commissions. Where dealers do this, they may also become eligible to claim Input Tax Credits (“ITCs”) in respect of GST paid on their business inputs. However, if dealer starts claiming ITCs before January 1, 2028 the CRA will want to see GST/HST being charged on the trailing commissions.

Industry participants should use the transition period to figure out how GST/HST applies to their activities, and make sure they come into compliance before January 2028.

Takeaways

The CRA’s delay in enforcing its GST/HST treatment of mutual fund trailing commissions is welcome news for the mutual fund industry, but it is not a reversal of the CRA’s underlying position.

Mutual fund managers, dealers, and advisors should use the transition period to prepare for the new GST/HST treatment, including reviewing registration obligations, tax collection processes, ITC recovery, and system changes.

For help with GST/HST on Trailing Commissions, please click here.