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: 183033
Business Number: […]
Dear [Client]:
Subject: GST/HST RULING
Adjustment services provided to […][the Person]
Thank you for your letter concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to supplies of adjustment services.
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
We understand the following facts from your letter and from phone calls with CRA officers. We understand that […] (the Company) provides adjustment services to the […]([…][the Person]).
For our reference, you have enclosed a copy of [the Person]’s insurance policy. You also provided us with a copy of a couple of invoices from the Company to [the Person].
[The Person] requests the Company’s adjustment services on a claim by claim basis. There is no written contract between the Company and [the Person]. The services provided by the Company to [the Person] are all in respect of claims against [the Person] within [the Person]’s retention limit in the […] Insurance policy issued to [the Person] by an insurer.
The Company invoices [the Person] for its services and [the Person] pays the invoices. The Company does not have a contract with [the Person]’s insurer and does not invoice the insurer for the services provided to [the Person].
We understand that the policy […] indicates that it is understood that the costs associated with the investigation of a claim are at [the Person]’s expense up to the total depletion of the retention amount.
RULING REQUESTED
You would like to know if the Company’s supply of adjustment services to [the Person] is an exempt supply of a financial service or a taxable supply. Also you asked if [the Person] is acting as an agent for the insurance company since the Company performs adjusting services for claims within the retention limit of the insurance policy.
RULING GIVEN
Based on the facts set out above, we rule that the adjustment services the Company provides to [the Person] are taxable supplies.
EXPLANATION
Generally, most goods and services supplied in Canada are subject to GST/HST unless they are specifically zero-rated or exempted under a provision in the ETA. Zero-rated supplies are taxable at the rate of 0% and are listed in Schedule VI to the ETA. Exempt supplies are listed in Schedule V to the ETA and are not subject to the GST/HST.
Part VII of Schedule V exempts a supply of a financial service that is not zero-rated by Part IX of Schedule VI. In order to determine if a supply will be exempt pursuant to Part VII of Schedule V, it is first necessary to review the definition of a financial service.
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 that is not excluded by any of paragraph (n) to (t) of that same definition. In reviewing paragraphs (a) to (m) of the definition, only paragraph (j) needs to be considered given the facts. Under paragraph (j) of the definition of financial service, insurance adjustment services that are supplied by insurers or by provincially licenced adjusters are treated as financial services where they meet certain conditions. Furthermore, paragraph (j) applies to adjustment services that are supplied to an insurer or a group of insurers by persons who are permitted by the provincial laws to provide adjustment services without holding a licence for that purpose. One of the conditions, to qualify as a financial service under paragraph (j) of the definition of a financial service is that an insurance adjustment service must include investigating and recommending compensation in satisfaction of a claim under an insurance policy that is not in the nature of accident and sickness or life insurance. It is a question of fact whether or not a claim is made under an insurance policy and whether a particular service meets the conditions set out in paragraph (j).
As there is no information that supports the fact that the Company’s services relate to a claim made under an insurance policy, paragraph (j) of the definition of financial service does not apply. Therefore the Company’s service is not included in the definition of financial service.
In addition, there is no evidence that there is an agent relationship between the insurer and [the Person] and, as the recipient of the supply is [the Person], the supply is a 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 rulings given in this letter provided that: none of the issues discussed in the rulings 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 613-670-1343. 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,
Gabrielle Nadeau
Insurance and ITC Allocation Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate
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