CRA narrows the portion of reinsurance premiums paid to related non-residents which it considers to be taxable loading for GST/HST purposes

Since 2005, financial institutions have been required to self-assess GST or HST on various ITA-deductible expenses incurred outside Canada relating to their Canadian activities.  Until recently (see Firth), CRA had been taking the position that a very substantial portion of reinsurance premiums paid by Canadian insurers to affiliated non-resident reinsurers represented taxable "loading," i.e., giving rise to an obligation to self-assess HST or GST under the above rules (as also expanded in 2010) if not already charged.

Finance indicated in November 2014 that its policy intent was that the Canadian insurers be taxable only on the portion of related-party financial services that are largely administrative in nature and not on amounts that are fundamentally financial in nature.  CRA has now published revised policies in Notice 287 which ostensibly accord with this intent.  In approximate terms, loading is largely restricted to the administrative component, so that amounts paid to reinsurer over and above the best estimate of losses (to reflect the transfer of risk) are excluded, as are ceding commissions and expense allowances for Canadian services of the Canadian primary insurer.  There also is a safe harbour (treating all the reinsurance premiums as exempt) where there is arm's length pricing for separate properly-scoped "service level agreements" between the Canadian primary insurer and non-resident affiliates.

Neal Armstrong. Summary of GST/HST Notice 287 "CRA Administrative Positions on the Application of the Import Rules for Financial Institutions to Reinsurance Contracts" under ETA – s. 217 – loading.