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: 144394
Business Number: […]
October 11, 2012
Dear [Client]:
Subject: EXCISE INTERPRETATION
Application of Part I (Insurance Premiums Other Than Marine) of the Excise Tax Act
Thank you for your fax of May 3, 2012, concerning the application of Part I of the Excise Tax Act (Insurance Premiums Other Than Marine), sent on behalf of your client, […].
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
INTERPRETATION REQUESTED
You have provided a specific fact scenario:
* Company A has global operations which include Canada. Insurance decisions are made from Company A’s global head office located outside of Canada.
* Company A engages insurance broker AA’s local office to place its entire insurance program.
* Company A works with insurance broker AA to design, manage and place all insurance for its global operations.
* Insurance broker AA obtains all underwriting information for Company A’s global operations and places the insurance on a global basis.
* Insurance broker AA works with its Canadian affiliate insurance brokerage, insurance broker BB, to manager certain aspect of the insurance policies for Company A’s Canadian operations. Insurance broker BB acts as a sub-broker for insurance broker AA.
* Insurance broker BB’s responsibility is to be named broker of record on the Canadian policy to invoice Company A for the premium related to the Canadian policies, to collect and deal with payment for the Canadian portion of the insurance premium, and to review the insurance policies prior to issuing the policies to Company A.
* Insurance broker BB does not collect underwriting information for the Canadian operations.
- Insurance broker BB is not directly engaged or paid by Company A’s Canadian affiliate.
- Insurance broker AA pays insurance broker BB directly for the work performed.
Based on this fact scenario, you would like to know:
1. Will the fact scenario result in the application of the 10% excise tax pursuant to Part I of the Act or would the updated interpretation of Part I of the Act apply such that no excise tax would be payable.
2. If insurance broker BB was to be paid directly by the Canadian affiliate of Company A would the answer to #1 change?
3. If the answer to #1 is that the fact scenario does not attract excise tax pursuant to the announced updated interpretation of Part I of the Act, will the application of the updated policy be applied retroactively, and if so, for what term?
INTERPRETATION GIVEN
Based on the information provided:
1. In the fact scenario given, provided that broker BB is a licensed Canadian broker and that insurance coverage is provided by an insurer licensed in Canada, the Part I tax on insurance premiums other than marine would not apply.
2. There would be no difference in our position were Broker BB to be paid directly by Company A. Provided that broker BB is a licensed Canadian broker and that insurance coverage is provided by an insurer licensed in Canada, the Part I tax on insurance premiums other than marine would not apply.
3. It is not the position of the Canada Revenue Agency to apply the updated policy retroactively.
The Canada Revenue Agency continues to review the administrative procedures respecting potential acceptable conditions for exemptions from the tax. The fact scenario given would fall within the scope of a common situation occurring in the industry […], that being where:
* more than one broker is involved in a placement, and
* the coverage is provided by an insurer licensed in Canada,
* with a licensed Canadian broker shown on the policy.
Provided that broker BB is a licensed Canadian broker and that insurance coverage is provided by an insurer licensed in Canada, the Part I tax on insurance premiums other than marine would not apply.
Further, there would be no difference in our position were broker BB to be paid directly by Company A. Provided that broker BB is a licensed Canadian broker and that insurance coverage is provided by an insurer licensed in Canada, the Part I tax on insurance premiums other than marine would not apply.
Finally, it is not the position of the Canada Revenue Agency to apply the updated policy retroactively.
The foregoing comments represent our general views with respect to the subject matter of your request. These comments are not rulings and, in accordance with the guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, do not bind the Canada Revenue Agency with respect to a particular situation. Future changes to the ETA, regulations, or our interpretative policy could affect this interpretation.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-957-1140.
Yours truly,
Neil Varan
Excise Taxes and Other Levies Unit
Excise Duties and Taxes Division
Excise and GST/HST Rulings Directorate
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