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: 84165
Business Number: […]
October 24, 2012
Dear [Client]:
Subject: GST/HST RULING
Application of GST/HST to an appraisal/inspection fee
Thank you for your fax of [mm/dd/yyyy], and your letter of [mm/dd/yyyy], concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to an appraisal/inspection fee. We apologize for the length of time it has taken us to respond to your query.
HST applies at the rate of 15% in Nova Scotia, 13% in Ontario, New Brunswick, and Newfoundland and Labrador, and 12% in British Columbia. GST applies at the rate of 5% in the remaining provinces and territories.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
STATEMENT OF FACTS
We understand […] (your company) is a construction company that as part of its business activities performs on-site assessments of damaged property at the request of […] (the insurance company). The on-site assessment consists of visiting the site of the damaged property, taking pictures, determining the cause of the damage, and estimating the cost of repairs. A detailed report containing this information is sent to the insurance company. If your company is not awarded the repair contract, you charge the insurance company a $[…] fee to cover the service of inspecting, appraising and producing the cost-of-repair estimate.
RULING REQUESTED
You would like to know if you are to charge GST/HST for this service.
RULING GIVEN
Based on the facts set out above, we rule that your company’s supply of this service of inspecting, appraising and producing a cost-of-repair estimate is not a taxable supply. It is an exempt supply to which GST/HST does not apply.
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
For a service supplied by your company to an insurer (or an insurance adjuster) to be exempt, the service must satisfy one of the exempting provisions set out in the ETA. In this particular situation – the service of inspecting, appraising and producing a cost-of-repair estimate concerning damaged property – the service would be exempt under the definition of financial service in subsection 123(1) if it complied with paragraph (j.1) of that definition and was not excluded by paragraph (r).
In other words, your company’s service would be exempt if the following conditions were met:
* the service is provided to an insurer or a person who supplies a service which is referred to in paragraph (j) (i.e., a provincially licensed adjuster who provides a service of investigating and recommending the compensation in satisfying an insurance claim that is not in the nature of accident and sickness or life insurance);
* the service is not provided by an accountant, actuary, lawyer or notary in the course of a professional practice; and
* your company inspects the property and provides an appraisal of the damage caused to the property.
Since your company’s charge is for a service where your company inspected the damaged premises to prepare its report and since you are supplying this service of inspecting, appraising and producing a cost-of-repair estimate to an insurance company, your company’s service is an exempt supply and you do not charge GST/HST for this service.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-4394. 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,
Doris McMullan
Insurance and ITC Allocation Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate
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