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, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 154220
Business Number: […]
February 18, 2014
Dear [Client]:
Subject: GST/HST RULING
Application of GST/HST to insurance related administrative services
Thank you for your letter of May 24, 2013, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to your insurance related administrative services.
The HST applies in the participating provinces at the following rates: 13% in Ontario, New Brunswick and Newfoundland and Labrador, 14% in Prince Edward Island (effective April 1, 2013) and 15% in Nova Scotia. The GST applies in the rest of Canada at the rate of 5%.
Effective April 1, 2013, the 12% HST in British Columbia has been replaced by the 5% GST and a provincial sales tax.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
STATEMENT OF FACTS
We understand that pursuant to a contract (the Agreement) you entered into with […] (the Corporation) on [mm/dd/yyyy], you provide […].
Under the Agreement, you are paid a fee by the Corporation of $[…] per case to $[…] per case, based on the work involved in the case. Under the Agreement, you are a contractor and not an employee of the Corporation, […].
In a conversation with […] of the […][Province A] GST/HST Rulings office, you advised that clients apply for insurance with a licensed insurer […]. In the course of providing your services under the Agreement, you contact the clients by telephone and ask them insurance application questions, such as their medical history, and if necessary […][further services provided]
When you have all of the required information, you review the insurance application. Based on established guidelines, you provide a recommendation as to whether the insurance application should be approved […] or declined.
You are not a licensed insurance agent or broker in [Province A].
[…][registration requirements]
RULING REQUESTED
You would like to know if your services provided to the Corporation under the Agreement are financial services which are exempt from GST/HST.
RULING GIVEN
Based on the facts set out above, we rule that your services to the Corporation under the Agreement are taxable for GST/HST purposes.
This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.
EXPLANATION
Generally, most supplies of property or services made in Canada are taxable and subject to the GST/HST, unless the supply is specifically zero-rated (subject to GST/HST at the rate of 0%) or exempt (not subject to the GST/HST).
Supplies of financial services are generally exempt from the GST/HST, other than certain zero-rated financial services (e.g., certain financial services provided by a financial institution to a non-resident). 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 paragraphs (n) to (t) of that same definition. It includes the following services (described in part in the paragraphs below), unless they are excluded by any of paragraphs (n) to (t) of the definition of financial service:
* paragraph (d) - the issue, granting and transfer of ownership or repayment of a financial instrument (such as an insurance policy),
* paragraph (h) - the underwriting of a financial instrument, and
* paragraph (l) - the arranging for certain financial services (for example, arranging for the issuance of an insurance policy).
Under the Agreement, you are providing a supply to the Corporation of administrative services related to assessing insurance applications. Your services may be used by an insurer in its process of underwriting and issuing insurance policies; however, it is the insurer that underwrites and issues its insurance policies. Therefore, your services are not financial services under either of paragraphs (d) or (h) of the definition of financial service.
As discussed in our GST/HST Memorandum 17.9, Insurance Agents and Brokers (revised June, 2013), the term “arranging for” is generally intended to refer to intermediation activities that are normally performed by certain financial intermediaries, such as licensed insurance agents and brokers. As you are not a licensed insurance agent or broker performing financial intermediation activities of a licensed insurance agent or broker, you are not arranging for the issuance of an insurance policy under paragraph (l) of the definition of financial service, and are not providing financial services for GST/HST purposes.
As there is no exemption for your supply of services under the Agreement, it is a taxable supply.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 780-495-6321. 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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