5 September 2007 Excise Interpretation 96337 - Canadian whisky and excise duty

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, sent to XXXXX with respect to the exemption request approval process for the tax on insurance premiums. In your letter, you provided us with comments on the information that the Canada Revenue Agency (CRA) mailed on XXXXX entitled, Basic Facts - Insurance Premiums Other than Marine.

The 10% tax on insurance premiums under Part I of the Excise Tax Act is not applicable on insurance that is not, in the opinion of the Commissioner, available within Canada. In the information mailed out by the CRA, it is stated that the applicant for the tax exemption must provide to the CRA "five letters of declination, which must be dated prior to the start date of the policy ...".

In your letter, you expressed concerns about the difficulty applicants might face if dealing with a slow response from an insurer in getting a declination letter. You also voiced concern about this new guideline being applied retroactively.

For your information, CRA officials have been working on developing a new form E638A, Statement of Availability or Declination from Authorized Insurers - 10% Tax on Insurance Premiums (Part I of the Excise Tax Act). The proposed form has been posted on our website at http://www.cra-arc.gc.ca/E/pub/et/etsl63/etsl63-e.html to solicit comments and suggestions from the public.

I am pleased to inform you that this new form also requests the date on which the insurer was first asked to provide insurance to the person, as well as whether the insurer was provided sufficient time to quote on the particular class of insurance. This will allow officials to adopt a more flexible approach by reviewing not only the date of declination, but also the date of the request for a quote from the insurer. This will ensure that the letter of declination date will not be the sole determinant in the approval process for applications for exemption. Of course, the letter of declination must still be dated within a reasonable amount of time prior to the start date of the policy.

As for your second concern, I wish to reassure you that previous applications for exemption are not being re-reviewed, unless of course, a taxpayer were to provide additional information that may have an impact on the decision taken. I can also advise you that the more flexible approach noted above will also be applied to existing requests currently being processed.

I trust that this responds to the concerns raised in your letter. Should you have further concerns regarding the administration of the Part I Tax on Insurance Premiums, please don't hesitate to contact CRA officials once again.

Sincerely,

Phil McLester
Director
Excise Duties and Taxes Division
Excise and GST/HST Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
Canada Revenue Agency

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