GP Distributions from "Investment Limited Partnerships" subject to GST/HST
“Investment limited partnership” general partner distributions may now be subject to GST/HST.
The Department of Finance released draft legislation on Friday September 8, 2017, which proposes that management or administrative services provided by a general partner of an “investment limited partnership” be subject to GST/HST.
The draft legislation defines “investment limited partnership” broadly to include a limited partnership, the primary purpose of which is to invest funds in property consisting primarily of financial investments: (a) if the limited partnership is represented or promoted as a hedge fund, investment limited partnership, mutual fund, private equity fund, venture capital fund or other similar collective investment vehicle, or (b) if a listed financial institution holds 50% or more of the total value of all of the interests in the limited partnership. With respect to the definition in paragraph (a), the Department of Finance Explanatory Notes indicate that this definition is intended to include limited partnerships in tiered investment fund structures such as master- feeder funds or fund-of-funds.
The draft legislation proposes that the amendments will apply to any consideration for the supply of an administrative or management service that becomes due or payable to the general partner on or after September 8, 2017. No GST/HST will apply to amounts paid prior to September 8, 2017 provided that no GST/HST was charged, collected or remitted. If, however, GST/HST was charged, collected or remitted on consideration paid prior to September 8, 2017, the tax will be payable.
In light of these proposed draft amendments, limited partnership should review their structures to understand the potential impact of these proposed amendments. The Department of Finance will accept comments on the proposed draft legislation until October 10, 2017.