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
Case Number: 119096
Attention: XXXXX
XXXXX
March 26, 2010
Subject:
GST/HST INTERPRETATION
PROPOSED LAW/REGULATION
Application of Transitional Rules for HST in Ontario to supplies made by funeral homes
Dear XXXXX:
Thank you for your letter of XXXXX, and our subsequent telephone conversations, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to supplies made by funeral homes. We apologize for the delay in our response.
The Government of Canada and the Government of Ontario have signed a Comprehensive Integrated Tax Coordination Agreement for the implementation of HST in Ontario. The HST will come into effect in Ontario on July 1, 2010, at a rate of 13%, consisting of a 5% federal part (equivalent to the existing GST) and an 8% provincial part.
Legislation required to implement the HST in Ontario has received Royal Assent by the Parliament of Canada and the Legislative Assembly of Ontario. However, many of the rules which would apply to transactions will be contained in regulations made under the Excise Tax Act (ETA). Although the Government of Ontario has announced details of the rules which may eventually apply, the required regulations have not yet been made by the Government of Canada.
The following interpretation is based on the transitional rules as announced in Information Notice No. 3, General Transitional Rules for Ontario HST, released by the Government of Ontario on October 14, 2009. This interpretation should not be taken as a statement by the Canada Revenue Agency (CRA) that the transitional rules will be made in their current form.
Interpretation Requested
As discussed in our telephone conversation on XXXXX, some of the questions you have asked involve more complex situations and will be addressed in a separate letter.
You would like to know how the HST in Ontario would apply to the following:
1. Would the transitional rules for arrangements for prepaid funeral services apply to funerals that are funded by insurance products?
2. Would the transitional rules for arrangements for prepaid funeral services apply to annuity-funded contracts?
3. If a family prepays for a funeral by making monthly instalments on an insurance program, would the HST apply to the monthly instalments?
4. The Information Notice released by the Government of Ontario refers to prepaid funeral services. Does this mean that even if a funeral including goods and services is prepaid before July 2010 under an arrangement, only the services portion is exempt?
5. How does the May 1, 2010, implementation date affect prepaid funerals?
Interpretation Given
Based on the information provided,
Questions 1 and 2 - Would the transitional rules for arrangements for prepaid funeral services apply to funerals that are funded by insurance products and to annuity-funded contracts?
For GST/HST purposes, an insurance policy is defined, in part, as a policy or contract of insurance that is issued by an insurer and includes an annuity contract issued by an insurer.
We would accept an arrangement that is funded by purchasing an insurance policy, the proceeds of which are forwarded to the funeral home to pay for the costs of the funeral services, as a prepaid funeral arrangement.
As long as the arrangement is in writing, the transitional rules for arrangements for prepaid funeral services would apply to funerals that are funded by insurance policies, including an annuity contract issued by an insurer. If the arrangement in writing was entered into before July 2010, the HST would not apply to consideration for the part of a funeral service that is performed on or after July 1, 2010. However, the GST would still apply to the consideration for the funeral services unless the arrangement is also grandfathered for GST (i.e., the arrangement was entered into in writing before September 1990).
Question 3 - If a family prepays for a funeral by making monthly instalments on an insurance program, would the HST apply to the monthly instalments?
An insurance policy is a financial instrument for GST/HST purposes, and the issue or granting of a financial instrument is a financial service. Where an insurer issues an insurance policy, the supply of the insurance is generally exempt for GST/HST purposes.
Generally, the premiums paid on an insurance policy would be consideration for an exempt financial service. Therefore, the GST/HST would not apply to the monthly premiums paid on an insurance policy purchased to fund a prepaid funeral arrangement.
Question 4 - The Information Notice released by the Government of Ontario refers to prepaid funeral services. Does this mean that even if a funeral including goods and services is prepaid before July 2010 under an arrangement, only the services portion is exempt?
The last paragraph in the section on Arrangements for Prepaid Funeral and Cemetery Services in the Information Notice does indicate that the transitional rule would also apply to a supply of property relating to the funeral, burial or cremation of an individual if the property is provided under an arrangement for the provision of a prepaid funeral or cemetery service that is relieved under this rule. Therefore, if a funeral that includes the provision of both goods and services is prepaid under an arrangement in writing that is entered into before July 2010, the HST would not apply to the consideration for any of the goods and services provided on or after July 1, 2010 under that arrangement. However, the GST would still apply to the consideration for any of the goods and services provided under that arrangement (again, unless the arrangement is also grandfathered for GST).
Question 5 - How does the May 1, 2010 implementation date affect prepaid funerals?
The more specific rule in the Information Notice for prepaid funeral and cemetery services applies notwithstanding the general transitional rules for services. In other words, for prepayments made on and after May 1, 2010 that are put in trust, the May 1, 2010 date does not affect arrangements for prepaid funeral and cemetery services.
For additional information on prepaid funeral arrangements, please see GST/HST Technical Information Bulletin B-091R, Application of the GST/HST to Prepaid Funeral Arrangements.
The foregoing comments represent our general views with respect to the transitional rules for the HST in Ontario as announced in Information Notice No. 3, General Transitional Rules for Ontario HST, released by the Ontario Ministry of Revenue on October 14, 2009, as they relate to the subject matter of your request. Any change to the wording of the transitional rules or any regulations regarding the HST in Ontario, if made, could have an effect on the interpretation provided herein. 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.
For your convenience, find enclosed a copy of GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-952-7909. 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,
Jacqueline Russell, CGA
Services and Intangibles Unit
General Operations and Border Issues Division
Excise and GST/HST Rulings Directorate
Enc.: GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service
UNCLASSIFIED
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