Delayed Assessments and the GST/HST Rebate for Pension Entities

GST/HST Notices - Notice 347
September 2026

Table of contents

• Background
• Overview – section 261.01 pension entity rebate and time limits
• New subsection 172.1(8.01)
  • Coming into force
• New section 172.11
  • Coming into force
• New subsection 172.2(3.1)
  • Coming into force
• Section 261.01 rebate
  • Time limits
• Tax adjustment notes for deemed tax paid under new paragraph 172.1(8.01)(b)
• New regulatory amendments
  • Amendments related to tax adjustment notes for deemed tax paid under new paragraph 172.1(8.01)(b)
  • Coming into force

Background

On August 9, 2022, the Department of Finance issued a news release which included proposed legislative amendments, and certain related regulatory amendments, to the rules in the ETA governing pension plans. These proposed amendments were included in Bill C-47, Budget Implementation Act, 2023, No. 1, which received royal assent on June 22, 2023. These amendments relate to situations where an employer is assessed for an amount of the GST/HST on a deemed supply under the pension plan rules within the four-year audit period but beyond the two-year time limit available for pension entities to claim a GST/HST rebate. The employer can be assessed as much as four years after the day on which the employer was required to file its GST/HST return for its last reporting period in the employer's fiscal year.

The amendments include all of the following:

• the addition of subsection 172.1(8.01), section 172.11 and subsection 172.2(3.1)
• amendments to the rebate provisions in section 261.01
• amendments affecting the election provisions in section 261.01
• amendments to subsections 232.01(5) and 232.02(4) in respect of tax adjustment notes (TANs) issued in respect of deemed tax
• amendments to the Selected Listed Financial Institutions Attribution Method (GST/HST) Regulations (the Regulations) that adjust Element G of the special attribution method (SAM) formula in subsection 225.2(2) in respect of the GST/HST rebate in section 261.01, input tax credits (ITCs) and TANs

The amendments effectively allow a pension entity of a pension plan to claim a rebate or an ITC in respect of an amount of tax beyond the normal two-year time limit in cases where a delayed assessment of an employer or a supplier makes it impossible for the pension entity to meet the two-year time limit in respect of the amount. In order to implement these changes, subsection 172.1(8.01) and section 172.11, as well as subsections 172.2(3.1), 261.01(3.2), and 261.01(3.3) were added. As a consequence of these additions, sections 232.01, 232.02, and the definition of pension rebate amount in subsection 261.01(1) were modified.

To more fully understand the rules discussed in this notice, refer to the following publications:

• GST/HST Notice 257, For Discussion Purposes Only - Draft GST/HST Technical Information Bulletin, The GST/HST Rebate for Pension Entities
• GST/HST Technical Information Bulletin B-108, Changes to GST/HST Rules for Pension Plans – New Section 157 and Amendments to Section 172.1
• GST/HST Notice 304, GST/HST Pension Plan Rules for Master Trusts

Overview – section 261.01 pension entity rebate and time limits

Generally, under certain rules described in section 172.1, a registrant participating employer of a pension plan is deemed on the last day of its fiscal year to have made taxable supplies of specified and employer resources (other than excluded resources) that are for consumption, use, or supply in the course of pension activities of the pension plan and is also deemed to have collected tax in respect of those supplies. Under section 261.01, a pension entity of the pension plan (as defined in subsection 123(1)) is generally eligible to claim a rebate calculated on eligible amounts for a claim period of the pension entity and may also elect to share the rebate amount with participating employers of the pension plan. Eligible amounts for a claim period on which the pension rebate amount is calculated include the deemed tax under section 172.1 as previously noted, and the tax actually paid by the pension entity during the claim period for expenses relating to the pension plan, such as management and administration expenses of the pension plan.

For purposes of the section 261.01 rebate, a claim period has the meaning assigned by subsection 259(1). The claim period of a pension entity at any time means:

• where the pension entity is at that time a registrant, the reporting period of the pension entity that includes that time
• in any other case, the period that includes that time and consists of either:
  • the first and second fiscal quarters in a fiscal year of the pension entity
  • the third and fourth fiscal quarters in a fiscal year of the pension entity

Where the pension entity is a registrant, an application for the rebate for a claim period must be filed by the entity within two years after the filing due date of the GST/HST return for the reporting period that includes the claim period. Where the pension entity is not a registrant, it must file the rebate application within two years after the end of its claim period. The two-year time limit is imposed by subsection 261.01(3).

Given that a pension entity may only apply for a rebate within the two-year time limit, there may be circumstances where an audit assessment (including a reassessment) of a previous reporting period of a participating employer could render the pension entity ineligible to make a rebate application. Specifically, since section 298 generally allows the Minister of National Revenue (the Minister) a four-year period in which to raise an assessment, a situation could arise where a participating employer of a pension plan is assessed for an amount of GST/HST on a deemed taxable supply under section 172.1 within the four-year audit period but beyond the two-year time limit available for pension entities to claim a rebate for the deemed tax.

Similarly, a third-party supplier may be assessed for taxable supplies made directly to a pension entity (and for which tax is payable by the entity) within the four-year audit period but beyond the two-year time limit. In either the case of a participating employer or a third-party supplier, the pension entity could not claim the related rebate in respect of the taxable supplies if not for the changes described in this notice. The addition of subsection 172.1(8.01), section 172.11, and subsection 172.2(3.1) apply to remedy this situation to effectively permit a pension entity, in the specific circumstances described in these provisions, to claim a rebate (or in cases where the pension entity is a registrant, claim an ITC under section 169 if eligible) in respect of an amount of tax beyond the normal two-year time limit.

New subsection 172.1(8.01)

New subsection 172.1(8.01) imposes information requirements on a participating employer of one or more pension plans. These information requirements apply when, in making an assessment of the net tax for a reporting period of a person (a participating employer of a pension plan), the Minister determines that the tax in respect of a taxable supply deemed to have been made by the person under section 172.1 is greater than the amount of tax that had been accounted for in respect of the supply prior to the assessment. Where the participating employer meets these information requirements, a pension entity of the pension plan may be considered to have paid the difference between the amount of tax assessed by the Minister and the amount of tax already accounted for (if any) in respect of the deemed supply under section 172.1. The information requirements set out in subsection 172.1(8.01) may extend the two-year time limit for a pension entity to claim a section 261.01 rebate (or an ITC, if eligible) in respect of the amount of tax it is deemed by subsection 172.1(8.01) to have paid.

Specifically, under subsection 172.1(8.01), if the Minister determines that the tax for a supply of all or part of a specified resource deemed to have been made by the employer under paragraph 172.1(5)(a) or 172.1(5.1)(a) or for a supply of an employer resource deemed to have been made by the employer under any of paragraphs 172.1(6)(a), 172.1(6.1)(a), 172.1(7)(a), and 172.1(7.1)(a) is greater than the amount of tax that had been accounted for in respect of the supply prior to the Minister's assessment of the net tax for the reporting period and if the person has paid or remitted all amounts owing to the Receiver General in respect of the net tax for the reporting period, if any, the rules described below apply.

First, paragraph 172.1(8.01)(a) requires that the employer, in prescribed form and in a manner satisfactory to the Minister, provide prescribed information in respect of the deemed supply to each pension entity of the pension plan that is deemed to have paid tax in respect of the supply. For more information, refer to Notice 348, Information Requirements Related to Delayed Assessments of Participating Employers of Pension Plans (Subsection 172.1(8.01)).

Further, the prescribed information is required to be provided to each pension entity before the day that is one year after the later of the following two days:

• the day on which the Minister sends the notice of the assessment to the participating employer
• the first day on which all amounts owing to the Receiver General in respect of the participating employer’s net tax for the reporting period, if any, have been paid or remitted to the Receiver General

Second, where the participating employer provides the prescribed information required by paragraph 172.1(8.01)(a) to the pension entity and in fact does so on a particular day that is after the end of the last claim period of the pension entity that ends within two years after the day on which the deemed supply was made, subparagraph 172.1(8.01)(b)(i) provides that the pension entity is deemed to have paid tax on the particular day determined using the formula in that subparagraph. The amount of tax that the pension entity is deemed to have paid on that particular day is equal to the amount determined by the following formula:

A × (B ÷ C)

where:

It should be noted that if, following the Minister's assessment, the total tax determined in respect of the supply that the participating employer is deemed to have collected is subsequently revised (such as, for example, if the participating employer appeals the assessment or the Minister issues a new assessment), then the amount of tax that the pension entity is deemed to have paid under subparagraph 172.1(8.01)(b)(i) is based on this new determination.

Coming into force

New subsection 172.1(8.01) applies in respect of any notice of assessment, reassessment, or additional assessment sent by the Minister after August 9, 2022.

In the case where the notice was sent by the Minister to a participating employer on or before August 9, 2022, the participating employer is not required to provide the prescribed information referred to in paragraph 172.1(8.01)(a) to each affected pension entity, but may voluntarily do so. However, without the prescribed information, the pension entity is not eligible to claim a rebate or ITC in respect of any tax added to the participating employer's net tax for the reporting period as result of the assessment. If the participating employer chooses to provide the prescribed information to an affected pension entity, it was required to do so on a day that is before the day that is one year after the later of the following two days:

• June 22, 2023 (the day on which Bill C-47, the Act of Parliament that implemented subsection 172.1(8.01) received royal assent)
• the first day on which all amounts owing to the Receiver General in respect of the net tax for the reporting period of the participating employer, if any, have been paid or remitted to the Receiver General

New section 172.11

The effect of section 172.11 is to change the day on which tax is considered to have become payable by the pension entity in respect of a supply for certain specific purposes. If section 172.11 applies in respect of tax that became payable on a particular day, section 172.11 provides that the amount is deemed to have become payable by the pension entity on the day on which the pension entity pays the amount of tax and not to have become payable on the particular day. For example, section 172.11 may have the effect of allowing a pension entity, where eligible, to claim a section 261.01 rebate or make an election provided for in that section in cases where the Minister assesses one of its suppliers for a taxable supply made to the pension entity for which an amount of tax was payable by the entity on a particular day but for which the supplier has not yet charged tax and where the two-year time limit for claiming the rebate (or making the election) would otherwise have prevented the pension entity from claiming the rebate (or making the election) in respect of the amount of tax. The specific conditions under which the deeming rule in section 172.11 will apply are as follows:

• The Minister assessed the supplier for an amount of tax in respect of a supply of property or a service that became payable by a pension entity of a pension plan on a particular day
• The supplier discloses in writing to the pension entity that the Minister assessed the supplier for the amount of tax
• The supplier of the property or service did not charge the tax before the end of the last claim period of the pension entity that ends within two years after the end of the claim period that includes the particular day
• The pension entity pays the amount of tax after the end of that last claim period (meaning the claim period that ends within two years after the end of the claim period of the entity that includes the particular day on which that tax became payable)
• The amount of tax is not included in determining either of the following:
  • a rebate under subsection 261.01(2) that the pension entity claimed for that last claim period or an earlier claim period of the pension entity
  • an amount that a qualifying employer (as defined in subsection 261.01(1)) of the pension plan deducts in determining its net tax for a reporting period as a result of a joint election made under any of subsections 261.01(5), 261.01(6), and 261.01(9) with the pension entity for that last claim period or an earlier claim period of the pension entity

Coming into force

New section 172.11 applies in respect of tax that a pension entity claims in a claim period that ends after August 9, 2022.

New subsection 172.2(3.1)

New subsection 172.2(3.1) is similar to section 172.11, but applies in cases where the GST/HST is payable by a master pension entity (as defined in subsection 123(1)) of a pension plan as the result of a net tax assessment by the Minister of one of the master pension entity's suppliers. When the conditions of subsection 172.2(3.1) are met, it may have the effect of allowing the claiming of a rebate, or making an election, under section 261.01 by the designated pension entity of the pension plan (as defined in subsection 172.2(2)) in respect of an amount of tax payable by the master pension entity even where the two-year time limit available to the designated pension entity to file a rebate application has passed.

More specifically, subsection 172.2(3.1) provides a deeming rule for the purposes of subsection 172.2(3). Subsection 172.2(3) deems a designated pension entity of a pension plan to have paid an amount of tax at the time that it became payable (or was paid without becoming payable) by a master pension entity of the pension plan.

The amount of tax deemed paid by the designated pension entity under subsection 172.2(3) may be included in determining its pension rebate amount under section 261.01 for the relevant claim period. Subsection 172.2(3.1) may apply to extend the two-year time limit by changing the date on which tax becomes payable by the master pension entity. Specifically, subsection 172.2(3.1) applies where the Minister makes a net tax assessment of one of the master pension entity's suppliers for a taxable supply and the supplier did not charge the tax on the supply within two years after the day the tax would first have been payable by the master pension entity.

As long as the supplier discloses in writing to the master pension entity that the assessment has occurred and the master pension entity pays that tax on a particular day that is more than two years after the day that the tax was first payable by the master pension entity, subsection 172.2(3.1), for the purposes of subsection 172.2(3) above, deems the tax to have become payable on the particular day that the tax is so paid.

The specific conditions under which the deeming rule in subsection 172.2(3.1) applies are as follows:

• The supplier did not charge tax on the supply to the master pension entity within two years of the particular day on which the tax became payable
• The supplier discloses in writing to the master pension entity that the Minister has assessed the supplier for that tax
• The master pension entity pays that tax on a day that is more than two years after the particular day on which the tax became payable by the master pension entity

Where these conditions are met, subsection 172.2(3.1) deems the GST/HST that is payable by the master pension entity, as the result of a net tax assessment of the supplier, to have become payable on the day that the master pension entity pays the tax.

Coming into force

Subsection 172.2(3.1) applies in respect of tax paid by a master pension entity after August 9, 2022.

Section 261.01 rebate

Under section 261.01, a qualifying pension entity of a pension plan may claim a rebate in respect of its pension rebate amount for a claim period. A pension entity of a pension plan (whether or not it is a qualifying pension entity) and its qualifying employers may also make a joint election to share an amount in respect to this pension rebate amount. The election allows the employers to make a deduction from their net tax of the shared amount. The pension rebate amount of a pension entity is generally 33% of its eligible amounts.

An eligible amount for a claim period of the pension entity is defined in subsection 261.01(1). Generally, paragraph (a) of the definition of eligible amount includes an amount of tax that became payable by the pension entity during a particular claim period, including tax deemed to have become payable under new section 172.11. Paragraph (b) of the definition includes tax deemed to have been paid during the claim period by the pension entity under section 172.1 (including an amount of tax deemed to have been paid under new subparagraph 172.1(8.01)(b)(i)) or subsection 172.2(3).

Subsection 261.01(4) provides that a pension entity cannot make more than one application for a rebate in respect of any particular claim period of the pension entity. However, new paragraph 261.01(3.2)(a) creates an exception by allowing for a rebate of the excess pension rebate amount for a claim period of the entity. The excess pension rebate amount is defined in subsection 261.01(3.3) to mean, in respect of an amount of tax deemed to have been paid under subparagraph 172.1(8.01)(b)(i), or to have become payable under section 172.11, by the pension entity during the claim period, the amount that would be the pension rebate amount of the pension entity for the claim period if the amount of tax were the only eligible amount of the pension entity for the claim period.

Where a separate rebate application is made for the excess pension rebate amount, the pension entity and the qualifying employers of the pension plan may also make a joint election (under subsection 261.01(5) or 261.01(6)) to share that amount to allow the employers a net tax deduction in respect of the shared amount. This joint election must be filed by the pension entity at the same time as the rebate application that is filed in accordance with paragraph 261.01(3.2)(a).

If the pension entity chooses to file a rebate application for the excess pension rebate amount separately, it may still file an application for the remaining pension rebate amount for the claim period. The remaining pension rebate amount for a claim period of a pension entity is defined in subsection 261.01(3.3) to mean the amount determined by the formula:

A − B

where:

In other words, the eligible amounts generated by subsection 172.1(8.01) or section 172.11 for the claim period are excluded from the amount of the pension entity's pension rebate amount (as defined in subsection 261.01(1)) for the claim period that can be included in a rebate application for the claim period if the pension entity had already claimed the excess pension rebate amount in an earlier application for the claim period.

If the pension entity chooses not to file a separate application for the excess pension rebate amount, it may include the deemed amounts under subsection 172.1(8.01) or section 172.11 in calculating its pension rebate amount for the claim period.

The tax deemed to be payable by a designated pension entity by operation of section 172.2 is excluded from the definition of excess pension rebate amount, even where it is subject to the deeming rule in new subsection 172.2(3.1). However, the eligible amounts in respect of this deemed tax payable may be included in the remaining pension rebate amount for a claim period of the designated pension entity.

Paragraph 261.01(3.2)(b) permits the pension entity of the pension plan and the qualifying employers of the pension plan to make a separate election under subsection 261.01(5) or 261.01(6) (though not under subsection 261.01(9)) for the claim period that is in respect of the excess pension rebate amount for the claim period in respect of the eligible amount. This election under subsection 261.01(5) or 261.01(6) is made separately from any election under that subsection in respect of the remaining pension rebate amount for the claim period.

However, paragraph 261.01(3.2)(b) applies only if, under paragraph 261.01(3.2)(a), the pension entity makes a separate application for a rebate under subsection 261.01(2) that is in respect of the excess pension rebate amount for the claim period in respect of the eligible amount.

As well, the separate election under subsection 261.01(5) or 261.01(6) that is permitted by paragraph 261.01(3.2)(b) in respect of that excess pension rebate amount must be filed at the same time as the separate application for a rebate under subsection 261.01(2) in respect of that excess pension rebate amount that is filed in accordance with the requirements set out in paragraph 261.01(3)(a). As a result, a separate election under subsection 261.01(5) or 261.01(6) that is permitted by paragraph 261.01(3.2)(b) in respect of that excess pension rebate amount must be filed within the time limits set out in paragraph 261.01(3.2)(a) that apply to the separate application for a rebate under subsection 261.01(2) in respect of the excess pension rebate amount.

Time limits

A pension entity that is applying for a GST/HST pension entity rebate may choose to either:

• File one application for the total pension rebate amount for the claim period
• File separate pension entity rebate applications for:
  • the excess pension rebate amounts for the claim period (special filing deadlines would apply as indicated below)
  • the remaining pension rebate amount for the claim period

As previously indicated, if a pension entity chooses not to file a separate application for the excess pension rebate amount, it may include the deemed amounts under subsection 172.1(8.01) or section 172.11 in calculating its total pension rebate amount for the claim period. The rebate application in this case would be subject to the normal two-year time limit.

However, if a pension entity chooses to file a separate application for the excess pension rebate amount, shorter time limits for filing the rebate application would apply. The portion of the rebate under subsection 261.01(2) that is an excess pension rebate amount for the claim period may be claimed in a separate application from the pension entity's remaining pension rebate amount provided that the rebate application is filed after the beginning of the pension entity's fiscal year that includes the claim period and not later than:

• if the pension entity is a registrant, the day on or before which the pension entity is required to file its GST/HST return for the claim period
• if the pension entity is not a registrant, the last day of the claim period

Where a pension entity has claimed the excess pension rebate amount in an earlier application for the claim period, the pension entity may still file an application for the remaining pension rebate amount for the claim period subject to the normal two-year time limit.

Where a separate application is made for the excess pension rebate amount, the pension entity and the qualifying employers of the pension plan may also make a separate joint election to share that amount to allow the employers to make a net tax deduction in respect of the shared amount. This separate joint election must be filed by the pension entity at the same time as the separate rebate application that is filed in accordance with paragraph 261.01(3.2)(a).

For more information on elections to share pension rebate amounts, refer to GST/HST Notice 257.

Tax adjustment notes for deemed tax paid under new paragraph 172.1(8.01)(b)

Where a participating employer of a pension plan is deemed to have made taxable supplies to a pension entity of the plan under section 172.1 and has also charged the GST/HST on an actual supply of the same property or service to the pension entity (or to the master pension entity of the pension plan, as the case may be), the employer may issue to the pension entity (including a designated pension entity in respect of a master pension entity) a TAN. The issuance of a TAN by the participating employer ensures that the employer does not remit tax twice on the same supply and also prevents the pension entity from realizing the benefit of a rebate or an ITC twice on the same property or service.

More specifically, when a TAN is issued by a participating employer and the pension entity has been deemed by any of subsections 172.1(5), 172.1(5.1), 172.1(6), or 172.1(6.1) to have received a supply and paid tax in respect of a specified resource or employer resource (as those terms are defined in subsection 172.1(1)), the following generally occur by operation of subsection 232.01(5) (in respect of specified resources) and subsection 232.02(4) (in respect of employer resources):

• The participating employer may claim a net tax deduction for the total tax amount of the TAN on the return for the reporting period that includes the day the TAN was issued
• The pension entity must add, in determining its net tax for the reporting period that includes the day the TAN was issued, all ITCs that the pension entity is entitled to claim in respect of the deemed tax
• The pension entity must repay to the Receiver General any rebate previously claimed on any part of the deemed tax that is an eligible amount for a particular claim period. The repayment must be made on or before the day that is the later of the day the application for the rebate was filed and the last day of the pension entity's claim period following the claim period in which the TAN was issued
• The qualifying employer of the pension plan must repay the net tax deduction previously claimed as a result of an election with the pension entity to share the rebate. The repayment should be made as an upward adjustment to their net tax in the return for the reporting period that includes the day that is the later of the day the TAN was issued and the day the election was filed with the Minister

Effective August 10, 2022, subsection 232.01(5) also applies where the pension entity is deemed to have paid tax under new paragraph 172.1(8.01)(b) in respect of the deemed supply of a specified resource or part. In addition, effective August 10, 2022, subsection 232.02(4) applies where the pension entity is deemed to have paid tax under new paragraph 172.1(8.01)(b) for deemed supplies in respect of employer resources.

Additional details on TANs can be found in GST/HST Notice 257, and in GST/HST Notice 304.

New regulatory amendments

Amendments related to tax adjustment notes for deemed tax paid under new paragraph 172.1(8.01)(b)

Generally, when determining its net tax for a reporting period, an SLFI is required to make an adjustment to its net tax calculation related to its liability for the provincial part of the HST by using the SAM formula in subsection 225.2(2).

As discussed earlier in this notice, there were certain regulatory amendments related to the new rules governing pension plans that were included in Bill C-47, which received royal assent on June 22, 2023. These amendments were made to paragraph 46(a) of the Regulations as a consequence of the addition of subsection 172.1(8.01), and generally provide for transitional adjustments that a pension entity that is an SLFI may be required to make under Element G of its SAM formula calculation in determining its net tax for a particular reporting period. Element G of the SAM formula in subsection 225.2(2) is the total of all amounts, each of which is a positive or negative prescribed amount. These amounts are added or deducted, as the case may be, in determining the net tax of the SLFI for the reporting period.

Specifically, where the pension entity is an SLFI, it is required to make adjustments in Element G of the SAM formula related to TANs that were issued to the pension entity for deemed tax paid under new paragraph 172.1(8.01)(b) under amended clauses (iii)(C) and (iii)(D) of the description of Element G3 in paragraph 46(a) of the Regulations. Clause (C) includes deemed tax paid under new paragraph 172.1(8.01)(b) that a pension entity that is an SLFI is required to pay under paragraph 232.01(5)(c) in respect of a specified resource. Clause (D) includes deemed tax paid under new paragraph 172.1(8.01)(b) that the pension entity that is an SLFI is required to pay under paragraph 232.01(4)(c) in respect of employer resources.

The August 9, 2022, Department of Finance news release also included draft amendments to paragraph 46(b) of the Regulations. These draft amendments to paragraph 46(b) were not included in Bill C-47 and we understand from the Department of Finance that they will not be enacted into law.

For more information on the SAM formula calculation and what is a prescribed amount for purposes of Element G, refer to Guide RC4050, GST/HST Information for Selected Listed Financial Institutions.

For additional details on SLFIs, refer to GST/HST Memorandum 17-6-1, Definition of Selected Listed Financial Institution.

Coming into force

Amended clauses (iii)(C) and (iii)(D) of the description of Element G3 in paragraph 46(a) of the Regulations apply in respect of any reporting period of a person that ends after August 9, 2022.