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.
[Addressee]
March 24, 2014
Dear [Client]:
Subject: GST/HST INTERPRETATION
Request for ministerial exception
Thank you for your letter of [mm/dd/yyyy], where you seek an exemption under subsection 273.2(5) of the Excise Tax Act (the ETA) from the requirement to report certain amounts on Form GST111, Financial Institution GST/HST Annual Information Return (the Annual Information Return). We apologize for the delay in responding to your enquiry.
A review of your request indicates the following:
1. […]
2. Most of the property and casualty insurers that are registered for GST/HST purposes are selected listed financial institutions (SLFIs) as described in subsection 225.2(1) of the ETA.
3. For purposes of the special attribution method (SAM) in subsection 225.2(2) of the ETA, the following are prescribed amounts of tax for the purposes of paragraph (a) of Element A and F:
“any amount of tax that became payable by an insurer, or that was paid by the insurer without having become payable, in respect of property or services acquired, imported or brought into a participating province exclusively and directly for consumption, use or supply in the course of investigating, settling or defending a claim arising under an insurance policy that is not in the nature of accident and sickness insurance or life insurance”
4. Other than what is now a requirement under section 273.2 of the ETA in complying with the filing of the Annual Information Return, these prescribed amounts of tax are generally not required to be tracked or reported separately for any other reason to be compliant for GST/HST purposes.
5. Since the inception of the GST in 1991, property and casualty insurers have not tracked the GST/HST paid on claims costs that are prescribed amounts of tax. The reason for this is that, as a GST/HST exempt-industry, there is little incentive for property and casualty insurers to incur the considerable cost of tracking these amounts, nor are members required to track these amounts for any business or regulatory requirement purposes. Consequently, they do not currently have processes or systems solutions to do such tracking.
6. […].
7. Pursuant to section 273.2 of the ETA, GST/HST registered property and casualty insurers are now required to report the actual or estimated amounts of prescribed amounts of tax. Property and casualty insurers are finding this requirement to be quite onerous as it would be very costly from both time and money perspectives to establish and maintain processes and/or systems solutions to track the actual amount of the prescribed amounts of tax; and because of the way claims costs are accounted for and tracked by property and casualty companies, approaches to determining reasonable estimates of the prescribed amounts of tax are all extremely labour intensive and still may not lead to reliable estimates.
8. […][XYZ] is requesting that the Minister exercise her power under subsection 273.2(5) of the ETA and exempt […][ABC] from the requirement under subsection 273.2(3) of the ETA to provide the prescribed amounts of tax for purpose of paragraph (a) of Element A and F in subsection 225.2(2) of the ETA and as described in paragraph 40(a) of the Selected Listed Financial Institutions Attribution Method (GST/HST) Regulations on the Annual Information Return.
Having considered the information above and consulted with interested parties such as Finance Canada that use the information collected, it has been determined that the Minister will not exempt […] [ABC] from the requirement under subsection 273.2(3) of the ETA to provide information related to the prescribed amounts of tax for the purpose of paragraph (a) of Element A and F in subsection 225.2(2) of the ETA and as described in paragraph 40(a) of the Selected Listed Financial Institutions Attribution Method (GST/HST) Regulations on the Annual Information Return.
As you are aware, under subsection 273.2(5) of the ETA, the Minister of National Revenue may exempt any reporting institution or class of reporting institutions from the requirement to provide any prescribed information or may allow any reporting institution or class of reporting institutions to provide a reasonable estimate of any actual amount that is required to be reported in the Annual Information Return. An exemption under subsection 273.2(5) of the ETA would generally be provided only in exceptional circumstances; one example is where a financial institution does not have all or some of the information required, because of a disaster such as a flood or fire at the financial institution’s premises.
It is important to note that Annual Information Return was introduced because there was a need for supplementary data from the financial services sector given the complexities in the sector and the specific GST/HST rules that apply to financial institutions. This additional data from financial institutions helps to improve compliance, maintain an efficient and effective tax administration system, and assess policy and legislative changes in a timely manner. It also assists the Government in meeting its commitments (under the Comprehensive Integrated Tax Coordination Agreement) to the provinces under the harmonized sales tax.
Should you require additional information, please do not hesitate to contact […], Excise and GST/HST Rulings Directorate at […].
Sincerely,
[…]
Legislative Policy and Regulatory Affairs Branch
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