Compliance
How the Postponed GST/HST Change on Trailing Commissions Affects Investors and Dealers
A significant tax shift affecting mutual fund trailing commissions has been delayed to 2028—learn how this impacts you and what steps firms should take now.
By NomadicTax Research Team • 5-8 min read • June 4, 2026
## What Are Trailing Commissions?
Trailing commissions are ongoing payments that mutual fund dealers receive from investment funds based on a client’s holdings. Historically, many of these payments were treated as **exempt financial services**, meaning they were outside the scope of GST/HST.
## The Proposed Change & Its Delay
CRA issued **Notice 344: Application of the GST/HST to Mutual Fund Trailing Commissions** in February 2026, which indicated that these commissions will now be considered taxable supplies rather than exempt financial services. This change was meant to take effect on **July 1, 2026**. ([canada.ca](https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/notice344/application-gst-hst-to-mutual-fund-trailing-commissions.html?utm_source=openai))
Subsequently, after consultations, CRA **delayed enforcement** of this new treatment. It will now take effect on **January 1, 2028**, giving industry players more time to adjust. ([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 Stakeholders
- **Mutual fund dealers**: You’ll need to rework accounting, invoicing, and possibly your contracts to distinguish between exempt and taxable supplies. For example, fee disclosures may have to change.
- **Investors**: There’s a possibility that taxable trailing commissions could be passed on to investors, through decreased returns or higher fees.
- **Regulatory & compliance teams**: Important to monitor CRA guideline changes and ensure your systems are ready for the 2028 implementation date.
## Actionable Steps to Prepare Now
1. **Conduct a review** of contracts and agreements to identify which trailing commissions might become taxable.
2. **Engage accounting and systems teams** to adjust billing systems accordingly.
3. **Budget for potential tax input credits** or offset for costs where applicable.
4. **Keep communication transparent** with clients about impending changes in fee structures and tax treatment.
## Practical Example
Imagine a mutual fund dealer earns a $1,000 trailing commission annually per investor. Under the new rule, that $1,000 becomes subject to 5% GST/HST (depending on the province). The dealer must then collect tax from the fund or client and remit it, increasing cost unless accounted for in fees.
## Key Takeaway
This delay gives firms until **January 1, 2028** to adapt to the new regime. Use this window to examine contracts, update systems, recalibrate fee models, and inform stakeholders of upcoming shifts in the tax landscape.