30 April 2007 Excise Interpretation 65282 - Tax Status of Denatured Ethanol

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.

Dear XXXXX:

Thank you for your letter XXXXX accompanying the exemption applications for XXXXX. As requested, we have reviewed the exemption applications submitted, and have some observations/comments regarding the exemption applications (Form E638) relating to certain insurance policies XXXXX. I apologize for the delay in replying.

Although the Summerside Tax Centre approved certain exemption applications, I understand that the CRA has not received any letters of declination to support the exemption applications for the taxation years ending XXXXX.

XXXXX

The CRA has not received any declination letters to support the Form E638 exemption applications filed with respect to these insurance policies XXXXX.

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These insurance policies are for marine packages and are exempt from the 10% excise tax on insurance premiums by virtue of paragraph 4(2)(a) of the ETA. As such, a person is not required to submit Form E638 plus five letters of declination in respect of an exemption for this class of insurance.

Additional Comments

We are prepared to allow a person an ample amount of time to file Form E638, as outlined above. However, the CRA requires a person to obtain and submit five letters of declination from authorized insurers along with each exemption application to substantiate its claim. The fact that a person submits five letters of declination along with its exemption application does not necessarily mean a particular insurance class was not available within Canada, or that there was insufficient market capacity at a particular point in time. The letters of declination represent one form of evidence that the CRA will examine when making its decision whether or not to grant an exemption from the 10% excise tax on insurance premiums.

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We would like to express our reservations about accepting letters of declination obtained in those circumstances where a person has approached five authorized insurers, and requested that they provide letters of declination after it has already obtained insurance from an unauthorized insurer. In such circumstances, insurers may decline to provide quotes for the insurance because the person has already obtained insurance from another insurer. It is our view that such declinations hold less weight and do not necessarily support the view that a particular insurance class was not available within Canada at a particular point in time.

We would like to give XXXXX an opportunity to respond to our observations and to provide the CRA with the required letters of declination and any other additional documents in support of its exemption applications. Should XXXXX wish to do so, it should provide this documentation to support these claims within 60 days of the date of this letter.

Should you have any questions, feel free to call Mr. Duncan Jones at (613) 957-8154 or

Mr. Michael Moskovic at (613) 957-9877.

Yours truly,

Phil McLester
Director
Excise Duties and Taxes Division
Excise and GST/HST Rulings Directorate

2007/05/09 — RITS 86550 — Tax Status of Fuel Sales