25 March 2003 GST/HST Ruling 40640[2] - Arranging for a Financial Service

Dear XXXXX

Thank you for your letter XXXXX (with attachments), concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the services provided by XXXXX (the Corporation).

Statement of Facts

Our understanding of the facts is as follows:

1. The Corporation is a corporation registered pursuant to the Excise Tax Act.

2. XXXXX (Agent) is a licensed insurance agency in certain provinces of Canada including XXXXX.

3. XXXXX (Company) is a corporation authorized to write life insurance risks in all provinces of Canada.

4. The Corporation has a technology platform (the Platform) which permits the electronic collection of mortgage loan application and underwriting information.

5. Mortgage brokers use the Platform to complete mortgage loan applications.

6. The Corporation, the Company and the Agent have entered into an agreement to collaborate and arrange for the distribution of mortgage life group creditor insurance policies to mortgage brokers and certificates of group creditor insurance to qualified borrowers. (A copy of this agreement was provided.)

7. The Corporation's responsibilities are detailed in XXXXX the agreement as follows:

XXXXX XXXXX

8. In consideration for the services provided, the Corporation is entitled to a monthly fee calculated in accordance with XXXXX of the agreement.

Ruling Requested

The services provided by the Corporation fall within paragraph (l) of the definition of financial service in subsection 123(1) of the ETA.

Ruling Given

Based on the facts set out above, we rule that the services provided by the Corporation do not fall within paragraph (l) of the definition of financial service in subsection 123(1) of the ETA. The services provided by the Corporation are taxable services pursuant to subsection 165(1) of the ETA.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal; that there are no relevant changes in the future to the Excise Tax Act, or to our interpretative policy; and that you have fully described all necessary facts and transactions for which you requested a ruling.

Explanation

GST/HST Policy Statement P-239 - Meaning of the Term "Arranging for" as Provided in the Definition of Financial Service states that there must be a clear nexus between the activities of the intermediary and the supply of the financial service. It further states that a service acquired by an intermediary from a third party for use by the intermediary in providing the "arranging for" service will not in itself qualify as an "arranging for" service.

The Company, the Agent and the mortgage brokers are the persons whose activities can be shown to have a clear nexus to the supply of the financial service. The Corporation provides the technology used by the Company, the Agent and mortgage brokers (the Corporation's existing clients) to facilitate the delivery of their products and services. [required only when the decision is unfavourable]

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-9577.

Yours truly,

Marilena Guerra
Financial Institutions Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate