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: 162589
Dear [Client]:
Subject: GST/HST INTERPRETATION
Application of GST/HST to adjuster services
We are writing in response to a letter […], concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to adjuster services. We apologize for the delay in our response.
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.
We understand from the documentation provided and our prior telephone conversation, that you operate a business called […][X]. You are licenced as an adjuster in […][Province 1], and also had a […][first level of an adjuster licence] from […][Province 2] to provide certain services of an adjuster in [Province 2], subject to certain conditions.
[…]
While the [first level of an adjuster licence for Province 2] was in effect, an adjuster independent contractor agreement (the Agreement) with […][Corporation A] was entered into in the name of [X], for [X] to perform insurance adjusting services in [Province 2].
Pursuant to the Agreement, [Corporation A] hired [X] as an independent contractor to adjust certain property and casualty insurance claims in [City 1, Province 2], […]. [X] agreed that it would obtain all necessary licenses prior to undertaking the work under the Agreement, and would comply with all applicable laws and regulations in the jurisdiction where the work is performed.
Under the Agreement, [X] was to be paid an agreed upon amount per hour for the work, plus it was to be reimbursed for certain expenses in relation to its adjusting services. […].
In our telephone conversation, you advised that you worked as a field adjuster for [Corporation A] pursuant to the Agreement. You inspected the damaged property, established the loss, identified the cause of loss, and provided a report, with recommendations to [Corporation A], who provided it to the Insurer. Most of the time when you performed your duties under the Agreement, you needed to visit the damaged property, take photos, make diagrams and get estimates. If the damage was small, you may not have inspected the property, as it may not have been economical to do so; rather, in those cases you reviewed documentation and made recommendations accordingly. You advised that your recommendations were reviewed and signed off by your supervisors; one at [Corporation A] and one at the Insurer.
You confirmed that none of your work for [Corporation A] was in respect of marine insurance policies. You also advised that you did not start work in [Province 2] until your [first level of an adjuster licence for Province 2] was in place.
We acknowledge that a ruling was requested; however, as noted in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, a ruling provides the Canada Revenue Agency's (CRA's) position on specific provisions of the legislation as these relate to a clearly defined fact situation of a particular person. As the circumstances are such that all of the pertinent facts cannot be established at this time (for example, whether it is the [X] or you personally who is making the supply under the Agreement), we are unable to rule on this issue. Rather, we are providing general information which we trust will be of assistance.
INTERPRETATION REQUESTED
You would like to know whether [X] was required to collect GST/HST on the services provided under the Agreement.
INTERPRETATION GIVEN
A person who is a GST/HST registrant is generally required to collect GST/HST on all of its taxable (other than zero-rated) supplies. Supplies of property and services made in Canada are taxable unless they are exempt under Schedule V to the ETA.
Supplies of financial services are exempt under section 1 of Part VII of Schedule V to the ETA unless they are specifically zero-rated under Part IX of Schedule VI to the ETA. A service will be a financial service where it is included in any of paragraphs (a) to (m) of the definition of financial service in subsection 123(1) and not excluded by any of paragraphs (n) to (t) of that same definition.
Paragraph (j) of the definition of financial service in subsection 123(1) includes the service of investigating and recommending the compensation in satisfaction of a claim where
(i) the claim is made under a marine insurance policy, or
(ii) the claim is made under an insurance policy that is not in the nature of accident and sickness or life insurance and
(A) the service is supplied by an insurer or by a person who is licensed under the laws of a province to provide such a service, or
(B) the service is supplied to an insurer or a group of insurers by a person who would be required to be so licensed but for the fact that the person is relieved from that requirement under the laws of a province.
Therefore, paragraph (j) includes in the definition of financial service the service of “investigating and recommending the compensation in satisfaction of a claim” by certain persons, and where certain conditions are met. Where the claim is not made under a marine insurance policy, nor an insurance policy that is in the nature of accident and sickness or life insurance, and the above Clause (B) does not apply, paragraph (j) requires that the services be supplied either by an insurer, or by a person who is licensed as an adjuster under the laws of the applicable province. Such a license must authorize the holder to investigate and to provide recommendations with respect to the compensation in satisfaction of a claim, for the conditions of paragraph (j) to be met in that situation. Where all of these conditions are met, including that the person is so licensed, the person’s services will be included in paragraph (j) even when provided to a person other than an insurer.
A [first level of an adjuster licence] from [Province 2], is not a licence that authorizes the holder to investigate and provide recommendations with respect to the compensation in satisfaction of a claim under an insurance policy, as required by Clause (j)(ii)(A) of the definition of financial service in subsection 123(1). As such, the supply made under the Agreement is not an exempt supply of a financial service.
[…].
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 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 directly at 780-495-7507. 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,
Eleanor Struth
Insurance and ITC Allocation Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate
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