Canada

GST 111: What is it and do you need to file it?

TAX ALERT  | 

In recent times, Canadian businesses may have received non-compliance notices from the Canada Revenue Agency (CRA), urging them to file a GST111 – Financial Institution Annual Information Return – for one or more fiscal years. Before you take any action, know that the CRA notices may not be based on accurate or timely information; as such, you may not need to file this return. The GST111 pertains only to a ‘reporting institution’ for GST/HST purposes. Thus, if you can demonstrate that your business does not fall into this category, the notice can be disregarded.

How do you know if you are a reporting institution?

 You are a reporting institution if you meet these criteria:

  • The total of all amounts included in income for income tax purposes exceeds $1 million; this is the last taxation year that ends in your  fiscal year
  • At any time in your fiscal year, the company is a financial institution
  • For GST/HST purposes, you’re a registrant at any time in the fiscal year.

Conditions for financial institutions

Three types of financial institutions (FIs) exist:

1.     Listed financial institution (LFI)

a.     banks, credit unions or persons whose principal business is the lending of money  or purchasing of debt securities

b.     investment plans

c.     persons whose principal business is that of traders, dealers, brokers or salesperson of financial instruments or money

d.     insurers or persons whose principal business is providing insurance

e.     segregated funds (of an insurer); or

f.      certain corporations that are deemed to be financial institutions

2.     Selected listed financial institution (SLFI)

a.     You will fall under this category if, at any time during your taxation year, you are an LFI with a permanent establishment in a participating province and in  any other province at any time during your taxation year

3.     De minimis FI

a.     You fall under this classification if your revenue for income tax purposes  from dividends, fees for a financial service, or interest, is greater than both 10 per cent of overall revenue and $10 million, in your previous tax year; or

b.     Income for income tax purposes from lending, interest, credit cards fees with you as the issuer, cash advances, or extending of credit surpasses $1 million

For the $1 million threshold, be aware of the following exclusions:

  • interest from a related corporation
  • late payment penalties for an account receivable in the normal course of business
  • interest from certain deposits where a bank or credit union is required to pay within 364 days or less (for taxation years beginning after March 21, 2016)
  • interest income for taxation years beginning before March 22, 2016, and ending after March 21, 2016.

Other conditions

If you are a GST/HST registrant or you are required to be registered because you make taxable supplies in Canada in the course of a commercial activity (and you are not a small supplier), then you will be viewed as a registrant.

If your annual income for income tax purposes surpasses $1 million for the last taxation year ending in the fiscal year, you will meet the definition. Note that the $1 million threshold will be prorated in cases where a taxation year is less than 365 days.

Consequences of not filing

Failure to report or misreporting can result in penalties as steep as $1,000 per required line on the return. Also, as of May 2017, non-compliance holds will be placed on institutions with outstanding GST111 returns. As such, no refunds or credits will be issued until the CRA receives the GST111 return.

If you receive this type of notice from the CRA, speak to your advisor as to what actions need to be taken to avoid negative effects on your business.

 


Subscribe to our newsletters

Subscribe


HOW CAN WE HELP YOU?

Contact us by phone +1.855.420.8473 or submit your questions, comments or proposal requests


CONTACT

Maria Severino

National Tax Leader


Recent Tax Alerts

CRA rules on application of simultaneous T1135 penalties

Penalties under subsections 162(5) & (7) may be assessed simultaneously if the taxpayer late-files a T1135 with missing required information

  • September 18, 2019

Is your business prepared for a visit from the CRA?

Taxpayers beware - CRA’s GST/HST audits have increased significantly and it has become very aggressive in its tax positions.

  • September 11, 2019

Post-mortem pipeline transactions can be a useful estate planning tool

CRA confirmed that pipeline transactions are still appropriate post-mortem planning tools to avoid double tax on private corporation shares

  • September 04, 2019

TCC supports CRA decision to reallocate partnership income and loss

Taxpayers may have to reallocate partnership income and loss if their original allocation does not meet CRA's “Reasonableness Test”.

  • August 29, 2019

Reminder: QST registration may be required as of Sept. 1, 2019

Businesses registered for GST/HST and without a physical presence in Quebec will be required to register for QST starting in September.

  • August 21, 2019