Tax & Trade Blog

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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.

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MOVING ASSETS IN TAX DISPUTE? THINK AGAIN!

WHY TRANSFERRING ASSETS CAN MAKE A BAD SITUATION WORSE

When a taxpayer is assessed by the Canada Revenue Agency (“CRA”), the instinct to “do something” can be overwhelming. One of the most common reactions is to start moving assets to related parties – for example to spouses or children – in the hopes of keeping them out of the CRA’s reach while the tax dispute plays out.

A recent Tax Court of Canada ("TCC") decision shows why this instinct is a bad idea, and is a lesson for anyone trying to sidestep tax problems: what one does after the fact can often make things worse for all involved!

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LAWYERS REQUIRED IN MOST LARGE TAX APPEALS

TCC REVIEWS NEW TAX COURT RULES APPLYING TO GENERAL PROCEDURE CASES

In a remarkable decision rendered with a great deal of humility, and with great credit to the Tax Court Justice involved, the Tax Court of Canada (“TCC”) in Tanafranca v. The King (2025 TCC 169) has taken the opportunity to review recent changes to the manner in which large taxpayers may be represented in their Tax Court Appeals.

This case is a reminder for taxpayers that, in General Procedure cases, Experienced Tax Counsel will be required – and usually for good reason.

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EMPLOYEE OR INDEPENDENT CONTRACTOR?

SIGNIFICANT TAX & LEGAL CONSEQUENCES COME WITH MISCLASSIFICATION

One area of Indirect Tax that is often underemphasized and underappreciated by businesses and tax professionals alike is the proper classification of employees and independent contractors. Canada’s rules generally mirror those in the United States, and in both jurisdictions, misclassification of a worker (i.e., classifying the worker as an independent contractor instead of an employee) can give rise to significant tax and legal consequences.

In this Report, we review the Canadian and U.S. rules, and the challenges businesses face in navigating this classification process.

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AUDIT INQUIRIES REQUIRE CAREFUL RESPONSES

THE STAKES ARE HIGH WHEN CRA REACHES OUT. DO NOT WAIT TO SEEK LEGAL HELP!

In the lifecycle of every large corporation, receiving an Audit inquiry from the Canada Revenue Agency (CRA) is not a matter of if, but when. Whether it arrives as a formal “Request for Information” or a polite introductory letter from an Auditor, this document acts as the first shot across the bow.

A business’s first response to an Audit inquiry has huge implications for the scope and duration of the ensuing Audit. It also carries implications for the taxpayer’s future liability for taxes, interest and potential penalties. In fact, at the very start of just about any kind of CRA inquiry, the stakes are often higher than most understand.

In this Tax Audits 101 Series Report, we discuss these initial Audit inquiries, why the stakes are so high, and why immediately seeking Experienced Tax Counsel can minimize negative consequences.