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, 20th floor
320 Queen Street
Ottawa, ON K1A 0L5
Case Number: 116213
XXXXX
XXXXX
XXXXX
August 11, 2009
Attention: XXXXX
Dear XXXXX:
Subject:
EXCISE INTERPRETATION
Direct Placement of Insurance Policies by Insured
Thank you for your XXXXX of XXXXX concerning the application of the Excise Tax Act (ETA) to the direct placement of insurance policies by an insured with a licensed insurance carrier in Canada.
All legislative references are to the ETA and the regulations therein, unless otherwise specified.
Interpretation Requested
You would like to know whether Federal Excise Tax (FET) applies on insurance in the following scenarios:
1) A policy is placed directly with a licensed insurance carrier in Canada. There is no licensed broker involved in the transaction and the insured procures insurance directly from the insurance company.
2) A policy is issued to an insured and no broker is listed on the policy.
Interpretation Given:
Based on the information provided:
1) There would be no federal excise tax applicable in scenario #1. The insurance policy is placed with an insurance company authorized by federal or provincial law to transact the business of insurance in Canada and there is no broker (foreign or otherwise) involved in procuring the insurance.
2) For scenario #2:
(a) The federal excise tax is not applicable if there is no broker named and no broker has been retained in arranging the insurance. This scenario would be the same as 1) above.
(b) If the contract of insurance was arranged through a broker or agent but their name was omitted from the policy, federal excise tax would not apply if the broker or agent is operating within Canada and no other broker from outside of Canada was involved in arranging the supply of insurance;
(c) If the contract was arranged through a broker or agent but their name was omitted from the policy, federal excise tax of 10% would apply if the broker or agent involved in the contract of insurance was from outside of Canada.
Explanation
Subsection 4(1) of the ETA sets out the obligation to pay a tax of ten percent on net premiums in respect of a contract of insurance entered into with an unauthorized insurer or through a broker or agent located outside of Canada.
For the scenarios presented, Paragraph 4(1)(a) does not apply provided that the insurance on risks in Canada is purchased from an authorized insurer. Paragraph 4(1)(b) does not apply provided that the insurance on risks in Canada is placed with an authorized insurer and no broker or agent from outside Canada is involved in the contract of insurance.
Subsection 4(4) deems that the contract of insurance has been entered into or renewed through the broker or agent directly retained or instructed by the insured and not through any other broker or agent.
If the broker who was first instructed by the insured is a non-Canadian broker than the premiums on that insurance policy would be subject to the 10% excise tax regardless of who collects the premiums or which broker name is included on or omitted from the policy/invoice.
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, Goods and Services Tax Rulings, 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) 954-4132.
Yours truly,
Joan Thompson
Rulings Officer
Excise Taxes and Other Levies
UNCLASSIFIED
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