Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
XXXXX
XXXXX
XXXXX
Attention: XXXXX
Case Number: 106370
December 23, 2008
Dear XXXXX:
Subject:
GST/HST INTERPRETATION
Financial Institution GST/HST Annual Information Schedule
Thank you for your XXXXX of XXXXX with respect to Form GST111 - Schedule 1 - Financial Institution GST/HST Annual Information Schedule (FI Schedule). We apologize for the delay in responding to your enquiry.
We would like to thank you for providing your comments with respect to the FI Schedule. Your concerns and recommendations will be considered further when the requirements under the FI Schedule are reviewed in the future.
We would also like to provide the following clarification related to some of your comments.
All legislative references are to the Excise Tax Act (ETA), unless otherwise specified.
Section B - Sales and other revenue
We confirm that where a property is transferred to an insurer for salvage and the property is subsequently sold by the insurer the payment received from the sale of the property would be included in Section B. Specifically, the amount should be reported on line 070 (if the supply is zero-rated), line 072 (if the supply is subject to GST) or line 073 (if the supply is subject to HST).
Section C - Purchase and other expenditures
We acknowledge that it may be challenging for certain financial institutions in the insurance industry to complete some of the information required in the FI Schedule. A financial institution may use estimates for certain lines in the FI Schedule when the actual amounts are not reasonably ascertainable.
For example, a financial institution may use estimates in Section C for lines 160, 170, 171, 173 and 180. In providing estimates, a financial institution should use its best efforts to provide the most accurate information possible in completing the FI Schedule. It is recognized that certain totals, for example, line 174, may include estimated amounts.
Claims Costs
Costs related to providing insurance may include purchases of financial services and purchases other than financial services. Costs reported for income tax purposes attributable to purchases of exempt or zero-rated financial services should be reported on line 160, for example the cost of acquiring a reinsurance policy. Costs, incurred in processing an insurance claim, that are attributable to purchases that are other than financial services should be reported on line 170 for taxable purchases subject to GST, line 171 for taxable purchases subject to HST or line 173 for purchases that are exempt, zero-rated and other non-taxable purchases.
Other expenditures that are not included in any of the previously mentioned lines should be reported on line 180, for example cash settlements paid by an insurer with respect to an insurance claim. In addition, any amount included on line 180 should be described in the space provided.
We are not currently contemplating an administrative exception or exclusions with respect to insurance claims costs.
Section L - Certification
We confirm that a financial institution is required to certify the information provided on the FI Schedule. As discussed, we recognize that not all companies have a system in place to track all the information requested in the FI Schedule and where appropriate, estimates can be used on certain lines.
General information
We also confirm that existing penalties under the ETA may apply where Form GST111 is not filed as required or is filed but the information is incomplete.
For example, section 284 provides that every person who fails to provide any information or document when and as required under Part IX or under a regulation made under Part IX is, except where the Minister waives the penalty, liable to a penalty of $100 for every failure unless, in the case of information required in respect of another person, a reasonable effort was made by the person to obtain the information.
We would also like to clarify that in general, amounts reported in the FI Schedule should be supported and tie into the financial institution's financial information. Also, certain line totals in the FI Schedule should have the same amount as that reported in the GST/HST Return. For example, the amount reported on line 050 of the FI Schedule should be the same as the one reported on line 103 of the GST/HST Return.
Election for Qualifying Institutions under Proposed Subsection 141.02(7) for Transitional Year
Proposed subsection 141.02(7) provides an election (the transitional year election) for qualifying institutions (QIs), as defined in proposed subsection 141.02(1), for their first fiscal year that begins after March 2007 (the transitional year). It allows a QI to elect to use an allocation method or methods that meet certain conditions to determine input tax credits (ITCs) in respect of its residual inputs. The term "residual inputs" is also defined in proposed subsection 141.02(1).
In order to be eligible to make the transitional year election, a QI must meet certain criteria, including the following:
1. the QI's net tax must have been assessed in at least one of the reporting periods in one of the four fiscal years that immediately precedes the transitional year (the selected reporting period);
2. the Minister's notice of assessment, subsequent assessment or reassessment in respect of the selected reporting period does not reflect any inappropriateness in respect of the methods used by the QI to determine ITCs in respect of all of its residual inputs; and
3. the methods used would be fair and reasonable if used in the same manner by the QI for the transitional year, for the purpose of determining the operative extent and procurative extent of all of its residual inputs.
With the introduction of standardized accounting in April 2007, every GST/HST return remitting tax or claiming a refund, as well as all rebate applications, will be assessed and a notice of assessment will be issued. The only exception is for nil returns, which will not be assessed.
If no inappropriateness with respect to a method was reflected in an assessment (e.g. an assessment issued as a result of standardized accounting), and a notice of subsequent assessment or reassessment is issued in respect of the reporting period(s) that reflects inappropriateness with respect to the ITC allocation methods, the QI could not then use these ITC allocation methods to form the basis of the transitional year election.
On the other hand, if the inappropriateness with respect to a method reflected in an assessment is addressed, and a notice of subsequent assessment or reassessment is issued in respect of the reporting period that does not reflect any inappropriateness with respect to the ITC allocation methods, the QI could then use these ITC allocation methods to form the basis of the transitional year election.
Please note that if the reporting period a financial institution wants to use as its selected reporting period has not been audited, the financial institution may request an audit by sending a request to the Assistant Director of Audit of its region.
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 CRA with respect to a particular situation.
If you require clarification with respect to any of the issues discussed in this letter, please call me at 613-952-9248 or Dawn Weisberg at 613-952-9210.
Yours truly,
Ivan Bastasic
Director
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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