News of Note

In a recent headquarters letter, CRA found that commissions earned by a "managing general agent" for agreeing with an insurance company to arrange for the sale  of policies to individual policy holders did not qualify as an exempt financial service for HST purposes because the master agent dealt with the individuals clients through subcontractors (various insurance agents) rather than directly with the clients.  Even more startling is that CRA found that where an insurance agent had sold its business to another agent, the deferred commissions which the purchaser now was entitled to receive became subject to HST because the purchaser itself was not the person who earned the commissions through the provision of financial services.  Both interpretations do not make sense from a policy perspective (and are also questionable on technical grounds) and could have significant negative consequences for other financial service providers, such as mutual fund managers.

Neal Armstrong.  Summary under ETA s. 123(1) - "financial service".