Compliance
GST/HST Overhaul: What You Need to Know About Trailing Commissions Deferral
The CRA’s revised administrative position on the GST/HST treatment of trailing commissions has been delayed—originally set for July 1, 2026, enforcement now pushed to January 1, 2028, giving industry more time to adapt.
By NomadicTax Research Team • 5-8 min read • June 3, 2026
## What are Trailing Commissions and the Proposed Change?
Trailing commissions are ongoing payments made by mutual funds to financial advisors, typically based on the value of assets under management, often treated implicitly as part of financial services. Historically, these commissions were **exempt** from GST/HST as part of financial service rules in Canadian tax law.��([blg.com](https://www.blg.com/en/insights/2026/06/cra-delays-gst-hst-changes-on-trailing-commissions-to-2028?utm_source=openai))
However, on **February 10, 2026**, the CRA announced a reversal in its position: as of **July 1, 2026**, trailing commissions would be treated as **taxable supplies** rather than exempt. This marked a major policy shift.��([blg.com](https://www.blg.com/en/insights/2026/06/cra-delays-gst-hst-changes-on-trailing-commissions-to-2028?utm_source=openai))
## What Changed: The Deferral to 2028
Following consultation with industry groups who raised concerns over the short implementation timeline, the CRA announced on **May 26, 2026**, that enforcement of the revised position will now be deferred until **January 1, 2028**.��([blg.com](https://www.blg.com/en/insights/2026/06/cra-delays-gst-hst-changes-on-trailing-commissions-to-2028?utm_source=openai))
## Implications for Financial Services Providers and Advisors
- Firms must **review their contracts**, billing systems, and financial disclosures to account for GST/HST on trailing commissions beginning **January 1, 2028**.
- Systems integration: accounting software and client billing tools need updating to reflect taxable supply treatment rather than exempt status.
- Advice and client quotes may need adjustment—prior cost estimates that excluded GST/HST will need revising.
- Financial statements may be affected; mutual fund dealers will need to accrue tax liabilities starting from the effective date.
## Example
Suppose a financial advisor currently receives CAD 1,000/month in trailing commissions. Under the new treatment, starting January 1, 2028, GST/HST (depending on jurisdiction) will be applied (e.g., 5% federal GST or combined GST/HST), increasing the amount invoiced or decreasing net revenue depending on client contracts. Exemption no longer applies as of that date. That is, income becomes **taxable supply**.
## What to Do Now
- Begin internal assessments to determine revenue and operational impact—review existing client agreements for trailing commissions.
- Update billing and accounting systems to separate and calculate GST/HST on those amounts.
- Train staff and advisors about the upcoming change, client communication, and compliance strategies.
- If possible, negotiate contract terms with clients before January 2028 to manage transition smoothly.
This deferral to 2028 gives industry reasonable time to adapt, but action now will ensure smooth compliance and avoid surprises when the policy becomes effective.