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
Case Number: 194986
Dear [Client] :
Subject: GST/HST INTERPRETATION – […][Services of a Managing General Agent]
Thank you for your letter […], concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to the services provided by […][a managing general agent] ([…][MGA]) to […][an insurer].
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.
INTERPRETATION REQUESTED
We understand that […][you] would like to know whether or not the commission that a […] insurer pays to an [MGA] is consideration for arranging for the sale of an insurance policy, pursuant to paragraphs 123(1)(d) and (l) of the financial service definition.
INTERPRETATION GIVEN
[…].
[…].
[…]. We understand that generally under an agreement between a insurer and an [MGA], the [MGA] follows the insurer’s guidelines to recruit, train, advise and monitor independent licensed insurance agents. Generally the licensed insurance agent also has an agreement with the insurer and that agent meets with customers to discuss various insurance options offered by the insurer. If the customer chooses an insurance product, the insurance agent completes the application for insurance and submits it to the [MGA]. The [MGA] reviews the application for completeness and submits it to the insurer who decides whether to issue the policy. The insurer pays the [MGA] a fee for its single supply. Since the [MGA] main activities include recruiting, training, advising and monitoring licensed insurance agents, and promoting the insurer’s insurance products, the predominant nature of the supply made by the [MGA] is a management and promotional service. This management and promotional service is not included in paragraphs (a) to (m) of the definition of financial service in subsection 123(1). For greater certainty, the [MGA] supply of a management and promotional service would also be excluded by paragraphs (r.4) and/or (t) of that definition. The [MGA] is making a taxable supply of a management and promotional service to the insurer.
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the interpretation given in this letter, including any additional information, is not a ruling and does not bind the Canada Revenue Agency (CRA) with respect to a particular situation. Future changes to the ETA, regulations, or the CRA’s interpretative policy could affect the interpretation or the additional information provided herein.
[…]. […]. If you require clarification with respect to any of the issues discussed in this letter, please call me at (613) 670-7949.
Best regards,
Marcel Boivin
Director
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate
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