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.
TO:
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
CASE NUMBER:
104669
DATE:
June 19, 2008
SUBJECT:
_Excise Interpretation
Part [I] Tax on Insurance
Thank you for your XXXXX concerning the application of Part I of the Excise Tax Act (ETA). The legislative references are to the ETA and the regulations therein, unless otherwise specified.
From your XXXXX, the correspondence forwarded between yourself and XXXXX of Company A and the additional information you provided on the insurance coverage, our understanding of the facts is as follows:
Statement of Facts
1. Company A obtains Property Insurance coverage from their Canadian broker XXXXX who purchases the insurance on their behalf from XXXXX Insurance Company, a XXXXX based company.
2. Company A obtains XXXXX coverage as part of the umbrella policy arranged through Company B's XXXXX section for the XXXXX worldwide coverage. The insurance is purchased from XXXXX who in turn channels the Canadian portion through XXXXX in XXXXX. The Canadian broker is XXXXX.
3. The insurance policies of Company A have an element of both local coverage and umbrella coverage. There are no separate policies issued worldwide through their parent company. All of the subsidiaries around the world issue their own direct policies with their own local brokers, and the premiums include both local coverage and worldwide coverage.
4. XXXXX
5. On a sample billing dated XXXXX from XXXXX that you submitted, it indicated that certain coverage XXXXX
6. Policy #XXXXX for XXXXX names Company A as the insured with an additional insured named as Company B, XXXXX.
7. Policy XXXXX for XXXXX names the insured as XXXXX.
XXXXX and XXXXX are both authorized to transact the business of insurance in Canada according to the list of insurance companies registered to do business in Canada under the XXXXX published by the XXXXXXXXXX is not included on this list.
Interpretation Requested
Does Part [I] tax of the ETA apply to the premiums paid on the insurance coverage purchased by Company A?
Interpretation Given
Based on the information provided, the tax under Part I of the ETA would apply to the premiums paid on the insurance coverage purchased by Company A.
Explanation
According to subsection 4(1) XXXXX, "Every person resident in Canada by whom or on whose behalf a contract of insurance, other than a contract of reinsurance, is entered into or renewed against a risk ordinarily within Canada at the time the contract is entered into or renewed .... (b) with any insurer that at the time the contract is entered into or renewed is authorized under the laws of Canada or of any province to transact the business of insurance, if the contract is entered into or renewed through a broker or agent outside Canada, shall, on or before April 30 in each year, pay to the Minister, in addition to any other tax payable under any other law, a tax of ten per cent on the net premiums paid or payable during the immediately preceding calendar year in respect of that insurance.
According to Subsection 4(4) XXXXX, "Where a contract of insurance is entered into or renewed through more than one broker or agent, or where payment of the premium or any part of the premium thereon is effected through more than one broker or agent, the contract shall, for the purposes of this Part, be deemed to have been entered into or renewed, as the case may be, through the broker or agent directly retained or instructed by the insured and not through any other broker or agent."
In order to establish which broker is the one directly retained by the insured, the CRA could review the insurance contract, the invoice, the broker to whom the payment was made, the currency used, the communications that occurred between the parties or any other relevant facts.
Having an office in Canada is not, by itself, sufficient to establish that the broker retained is not outside Canada. The broker retained must be the initial contact and stay involved as the primary contact of the insured until the completion of the transaction.
From the information and documentation provided, the XXXXX of the US parent, Company B, is responsible for negotiating the property and liability insurance protection required by the subsidiary, Company A. The insurance is then placed through a Canadian broker with an American insurance company that is authorized to transact the business of insurance in Canada.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 954-4132.
Yours truly,
Joan Thompson
Rulings Officer
Excise Taxes and Special Levies
Excise Duties and Taxes Division
UNCLASSIFIED
Email this Content