Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 11th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 189221
Business Number: […]
December 20, 2018
Dear [Client]:
Subject: GST/HST RULING
Application of GST/HST to the service of assessing the replacement value of […][property]
Thank you for your letter concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to the service of assessing the replacement value of [property]. We apologize for the delay in our reply.
The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
STATEMENT OF FACTS
Based on your letters and documentation and our telephone conversations, we understand the following:
1. […] (the Company) is located in [city, province], and is registered for GST/HST.
2. The Company entered into an agreement (the Agreement) with […] (the Insurer).
3. Under the Agreement, the Insurer pays a fee to the Company for the service of assessing the replacement value of damaged, lost, or stolen [property] for which a claim is made by an insured person under an insurance policy issued by the Insurer where the insured person is entitled to replace the [property]. The Agreement indicates that the fee is payable by the Insurer only where the insured person does not obtain the replacement of the [property] through the Company.
4. You indicated that […] the Insurer obtains the Company’s service of assessing the replacement value of [property] by […]. The Company may contact the insured person to collect additional information about the [property]. For damaged [property], the Company […][inspects the property]. For lost or stolen [property], the Company does not inspect the last-known place the [property] was situated before it was lost or stolen. The Company provides the Insurer with a report indicating the replacement value of the damaged, lost or stolen [property].
5. You advised that the Company’s employees perform the service of assessing the replacement value of [property] at the Company’s office in [city, province]. […]
RULING REQUESTED
You would like to know if the Company is required to charge GST/HST on the fee paid or payable by the Insurer for the Company’s supply of the service of assessing the replacement value of [property].
RULING GIVEN
Based on the facts set out above, we rule that the Company’s supply to the Insurer of the service of assessing the replacement value of damaged, lost or stolen [property] is a taxable supply and not an exempt supply of a financial service. The Company is required to charge GST/HST on the fee paid or payable by the Insurer for this taxable supply.
EXPLANATION
A GST/HST registrant is generally required to charge GST/HST on a taxable supply of property or a service made in Canada (other than a zero-rated supply that is taxable at 0%) but not on an exempt supply.
A supply of a financial service is exempt under Part VII of Schedule V to the ETA unless it is specifically zero-rated under Part IX of Schedule VI to the ETA.
A financial service is defined in subsection 123(1) to mean anything that is included in any of paragraphs (a) to (m) of that definition and is not excluded by any of paragraphs (n) to (t) of that same definition.
A financial service includes, under paragraph (j.1), the service of providing an insurer with an appraisal of the damage caused to property, or in the case of a loss of property, the value of the property, where the supplier of the appraisal inspects the property, or in the case of a loss of the property, the last-known place where the property was situated before the loss.
Subsection 123(1) provides that an “insurer” means a person who is licensed or otherwise authorized under the laws of Canada or a province to carry on in Canada an insurance business or under the laws of another jurisdiction to carry on in that other jurisdiction an insurance business.
The Company’s supply of the service of assessing the replacement value of damaged, lost or stolen [property] to the Insurer is not included in paragraph (j.1) of the definition of financial service because it does not meet the conditions of that paragraph. Although the Company may inspect the damaged [property], it provides an assessment of the replacement value of the [property], not an appraisal of the damage caused to the [property]. Also, although the Company provides a service of assessing the replacement value of the lost or stolen [property], the Company does not inspect the last known place where the [property]was situated before the loss.
Therefore, the Company’s supply of a service to the Insurer of assessing the replacement value of damaged, lost or stolen [property] is a taxable supply and not an exempt supply of a financial service. The Company is required to charge GST/HST on the fee paid or payable by the Insurer for this taxable supply.
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the Canada Revenue Agency (CRA) is bound by the ruling given in this letter provided that: none of the issues discussed in the ruling are currently under audit, objection, or appeal; no future changes to the ETA, regulations or the CRA’s interpretative policy affect its validity; and all relevant facts and transactions have been fully and accurately disclosed.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (780) 495-6518. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Yours truly,
Heather Gibbard
Insurance and ITC Allocation Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate
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