On 13 May 2026, the Canada Revenue Agency (CRA) verbally informed various industry groups that it intends to grant a material extension to the implementation deadline for applying goods-and-services tax/harmonized sales tax (GST/HST) to mutual fund trailing commissions. The CRA also stated that it will provide further details with respect to the enforcement of its administrative position in a notice that will be published by the end of the month.

The CRA had previously indicated in a recent GST/HST interpretation and a related information notice that GST/HST would apply to trailing commissions effective 1 July 2026. (For more information, see EY Global Tax Alert, Canada Revenue Agency reverses longstanding position on GST/HST status of trailing commissions, dated 14 January 2026.)

Background

A mutual fund manager who provides management and administrative services to a mutual fund may be paid a fee for those services. GST/HST generally applies to the fee, which includes an embedded "trailing commission." A manager will pay a portion of the trailing commission to a dealer that distributes shares or units of the fund as long as the investor owns the securities.

The CRA's longstanding administrative position was that the trailing commission the manager paid to a dealer was exempt from GST/HST to the extent that:

• The payment was intended to compensate the dealer for distributing shares or units in a mutual fund.
• The dealer was the person who facilitated the initial sale of shares or units in the fund.

The CRA's reasoning for this position was that the manager paid the consideration to arrange for the sale of shares or units in the fund, resulting in an exempt supply for GST/HST purposes in accordance with paragraphs (d) and (l) of the definition of "financial service" in subsection 123(1) of the Excise Tax Act (the Act).¹ The mutual fund industry also took the position that with respect to payments the dealers make to agents, salespersons or advisors, any portion of the trailing commission payment also represented consideration that was exempt from GST/HST.

However, in RITS No. 246664, GST/HST Interpretation — Tax status of trailing commissions (22 December 2025), the CRA stated that "dealers are paid ongoing trailing commissions to enable investors' access to the ongoing support, servicing and advice supplied by their dealers."

New administrative position

The CRA considered the provision of investment account support and servicing to be an "asset management service," which is excluded from the definition of "financial service," as is a service of providing investment advice.² Such services are thereby subject to GST/HST.

As a result, the CRA announced it was changing its position and that GST/HST would generally apply to mutual fund trailing commissions paid by managers to dealers, effective 1 July 2026.³ In light of the CRA's comments, it was expected that GST/HST would also apply to commissions that agents and financial advisors earn from dealers.

The CRA's new administrative position has substantial implications for managers, dealers and agents, which are discussed in EY Global Tax Alert, Canada Revenue Agency reverses longstanding position on GST/HST status of trailing commissions (link provided above).

Deferral of new administrative position

The CRA has now deferred implementation of its new administrative position, verbally informing industry groups that it intends to grant a material extension to the 1 July 2026 implementation deadline for treating trailing commissions as taxable for GST/HST purposes.

A notice providing further details with respect to the enforcement of the CRA administrative position is expected by the end of May 2026.

Implications

Although the deferral provides temporary relief for managers, dealers and advisors, businesses should continue to assess systems, contracts and pricing to prepare for the eventual application of GST/HST to these commissions.