2 May 2005 Excise Interpretation 59118 - Part I of the Excise Tax Act

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 request XXXXX concerning the application of the Excise Tax Act (ETA) to your operations.

Interpretation Requested

The rules governing the application of Part I of the ETA when more than one broker are involved in the transaction.

A United States (US) parent company contacted a US broker to obtain insurance for its Canadian subsidiary, covering a risk in Canada. The US broker retained the insurance with a Canadian insurance company through the US broker's Canadian office.

Interpretation Given

Based on the information provided, the tax under Part I of the ETA would apply to the transaction according to paragraph 4(1)(b) of the ETA as the contract was entered into through a broker outside Canada.

When more than one broker is involved in the transaction, subsection 4(4) of the ETA states that the contract is deemed to have been entered into through the broker directly retained or instructed by the insured and not through any other broker.

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.

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the Excise Tax Act, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST/HST Memoranda Series, do not bind the Canada Revenue Agency with respect to a particular situation.

For your convenience, find enclosed a copy of section 1.4 of Chapter 1 of the GST/HST Memoranda Series.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 954-4132.

Yours truly,

Denis Linteau
Other Levies Unit
Excise Duties and Taxes Division
Excise and GST/HST Rulings Directorate

2005/04/01 — RITS 56283 — Part I Tax on Insurance Premiums