Section 175.1

Table of Contents

See Also

Le Groupe PPP Ltée v. The Queen, 2017 TCC 2, briefly aff'd 2018 FCA 123

“warranties” funding the incremental cost of a new vehicle after complete loss of old vehicle likely were insurance policies and were not re quality, fitness or performance

The appellant (“PPP”) was a GST-registered corporation which offered motor vehicle replacement guarantees (the "warranties") through automobile dealers (the "dealers"). The dealer offered the warranty on PPP’s behalf on the sale of a motor vehicle. A customer of the dealer would already have a primary standard insurance policy, so that what the warranty covered, in the event of the destruction or theft of the purchased vehicle, was the deficiency between its depreciated book value (which was covered by the primary policy) and the cost of purchasing a new replacement vehicle. The new replacement vehicle would be purchased from the dealer, with PPP paying the dealer directly.

PPP unsuccessfully claimed input tax credits (“ITCs”) under ETA s. 175.1 respecting the payments made by it under warranties.

In appearing to find that the warranties were insurance policies (notwithstanding that PPP was not licensed as an insurer, which was required of it in order to issue insurance products), and after having quoted (at para. 45) a Quebec treatise on the law of insurance stating “guaranteeing a product against any risks whatever partakes of insurance; guaranteeing a product against risks arising from a defect in its manufacture partakes of a warranty,”) Tardif J stated (at paras. 84-85 , TaxInterpretations translation):

[I]t is public knowledge that conventional insurers…offer similar protection without the obligation to purchase the replacement vehicle from the same dealer.

The argument that there is a warranty by virtue of the sole fact that the obligation of the consumer to deal with the dealer who had sold the plan for his or her protection …is unconvincing.

In further finding that the PPP-provided warranties were not “in respect of the quality, fitness or performance” of the purchased vehicles, as also required in order for s. 175.1 to apply, Tardif J stated (at para. 90):

…[T]he quality, fitness or performance of a vehicle have nothing to do with theft or total loss. They essentially relate to the function and use of the vehicle.

Words and Phrases
insurance policy warranty
Locations of other summaries Wordcount
Tax Topics - Excise Tax Act - Section 169 - Subsection 169(1) payer of auto “warranty” claim did not benefit from the auto supply 277
Tax Topics - General Concepts - Illegality whether a product was an insurance policy did not turn on whether the provider was a properly licensed insurer 216

Administrative Policy

Taxable Supplies - Special Cases [CRA website]

Warranty reimbursements

Warrantors of goods can claim input tax credits (ITCs) for the GST/HST part of reimbursements they make to warranty holders for goods or services such as repairs covered under the terms of a warranty and provided by a third party. For instance, a warrantor may reimburse a warranty holder when the warranty holder pays for repairs due to an emergency or due to the distance from the warrantor's own authorized repair facility.

The ITC you as the warrantor can claim is based on the part of the total cost that you reimburse the warranty holder. Calculate your ITC using the formula:

A × (B ÷ C)

A is the GST/HST payable by the warranty holder for the goods or services;

B is the amount of the reimbursement; and

C is the cost to the warranty holder of the repair.

You must include with the reimbursement a written statement that a portion of the reimbursement represents GST/HST.

GST/HST Memorandum 14.5 "Election for Nil Consideration" September 2012

Michael, a GST/HST-registered sales person, uses his car to meet clients. His car breaks down, and he calls for emergency roadside assistance, which is covered under warranty. There is no dealer nearby, and the only repair shop within towing distance is an independent garage. The garage tows and repairs the car for a total of $630 ($500 plus $100 for remote service charge, plus $30 GST). Michael sends this bill to the warrantor who agrees to pay the bill except for the remote service charge. There is a $50 deductible plus GST under the warranty. The warrantor reimburses Michael $472.50 calculated as follows:

Total paid by Michael


Less $100 remote service charge plus $5 GST

− 105.00

Less $50 deductible plus $2.50 GST

− 52.50

Amount reimbursed to Michael


Using the formula above, the warrantor can claim an ITC of $22.50 calculated as follows:


= $30.00 × ($472.50 ÷ $630.00)

= $30.00 × 0.75

= $22.50