Starting 1 July 2026, mutual fund trailing commissions in Canada will be subject to GST/HST. Dealers and fund managers must prepare for compliance, including registration, invoicing, and system updates, while reviewing agreements and exploring potential exemptions for intercompany transactions.
The Canada Revenue Agency (CRA) will require mutual fund dealers to collect goods and services tax/harmonised sales tax (GST/HST) on trailing commissions, as they are now considered taxable supplies, starting 1 July 2026.
The CRA’s position on mutual fund trailing commissions could affect the timing of major capital property purchases, and requires Dealers and fund managers to plan ahead for compliance by 1 July 2026. Quebec has not decided if QST will apply to mutual fund trailing commissions for Quebec sales tax (QST) purposes.
Dealers may need to register for GST/HST if their taxable supplies exceed CAD 30,000 annually and must then charge, collect, and remit GST/HST on trailing commissions.
Fund managers must ensure trailing commissions are properly invoiced and documented to support input tax credits, which may require updates to billing and accounting systems.
Existing agreements between fund managers and Dealers should be reviewed for GST/HST implications, and related parties may explore a section 150 ETA election to potentially exempt certain intercompany supplies from GST/HST.
Earlier, the Canadian government announced that distributed investment plans, including mutual fund trusts and investment limited partnerships, must contact their investors by 15 October 2025, to collect specific information related to GST/HST and Quebec sales tax (QST) in accordance with tax information-sharing regulations.
