The Investment Funds Institute of Canada (IFIC) on Friday said it welcomes a recent decision by the Canada Revenue Agency to delay implementation of a new tax treatment for investment management fees.

Back in 2016, CRA said that it would begin applying the "advantage rules" to investment management fees as of Jan. 1, 2018.

In September, the CRA announced it is deferring implementation for a year, so that the new tax treatment — which could see investment management fees charged outside of registered plans subject to a 100% tax penalty — would kick in on Jan. 1, 2019.

"We appreciate the CRA's decision to postpone implementation to allow time for investors and the industry to prepare for these changes," said Paul Bourque, president and CEO of IFIC, in a statement.

"Since details of how the new rule will work have not been finalized, the new date will allow time for the CRA to finalize its implementation plans, for the industry to design outcomes that are in clients' interests, and for advisors to inform clients of their options," he adds.

The CRA is concerned that investors who pay fees for a registered plan outside of the plan are effectively gaining an unwarranted tax advantage. The change in tax treatment has the potential to impact many investors that pay fees outside of their registered plan to preserve assets that are tax sheltered.

In a bulletin announcing the decision to delay implementation, the CRA indicates that it is committed to working with the investment industry to implement the new approach, and that it is, "currently considering a number of submissions from various stakeholders" on the proposed new tax treatment.

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