Retailers, automotive dealers, bankers, travel agents, and other "incidental sellers" (as that term is used by the CRA) should review updated CRA guidance on GST-exempt supplies. In a recent publication, the CRA confirms that, where a person whose primary business is not insurance facilitates the sale of insurance on behalf of the insurer, their fees would generally be consideration for an exempt supply of a financial service. The CRA reasons that the incidental seller is arranging for the supply of a GST-exempt financial instrument (i.e., the insurance policy). The CRA further adds that, where the seller is doing more than arranging for the supply of insurance, it is a question of fact whether those fees are still tax-exempt.

The CRA previously considered those fees as consideration for taxable supplies because it found that the predominant element to the supplies was a promotional and administrative service. However, the CRA says it has changed its position based on the principles from two recent court decisions.

KPMG observations

Taxpayers should monitor any changes to the CRA's administrative position on "arranging for" GST-exempt services, as it could affect their input tax credit (ITC) claims. It will be interesting to see if the CRA updates documents related to "arranging for" GST-exempt services (e.g., GST/HST Technical Information Bulletin B-105 (February 2011)). This bulletin, which provides the CRA's position on what "arranging for" means in the definition of "financial service", has been labelled as being under review for several years on the CRA's website. The CRA also previously circulated drafts of a special bulletin specific to the insurance industry, which indicated that supplies by incidental sellers are taxable.

For more information, contact your KPMG adviser.

Information is current to December 20, 2021. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500