Insurance intermediaries, such as managing general agents, third-party administrators and entities offering insurance products in the auto sector, should review recently released GST/HST guidance. In Notice 325, “Services Provided by Certain Insurance Intermediaries”, the CRA provides guidance to help insurance intermediaries determine whether their services are GST/HST-exempt “arranging for” financial services. In addition to providing various technical details related to the concept of “arranging for”, the new Notice provides several helpful examples of various insurance intermediaries’ services to illustrate the CRA’s guidance and clarifies that having more than one agreement does not automatically indicate that there are two separate supplies. The CRA will accept comments on the new GST/HST guidance until October 31, 2023.

Based on the guidance, reviewing of all relevant agreements as well as determining the predominant element of the service continue to be critical steps in assigning the proper tax-status to the insurance intermediaries’ services.


In the insurance industry, insurers are often helped by various intermediaries to sell insurance policies to policyholders or perform other tasks, such as managing claims. While the supply of the insurance policy to the policyholder is generally not subject to GST/HST, the services of insurance intermediaries may be taxable or exempt based on their facts and circumstance. These insurance intermediaries may provide a wide range of services, such as selling, promoting, and designing insurance policies, collecting premiums, and managing or training subcontracted agents, among others. Insurance intermediaries must determine whether they are required to collect GST/HST on their services.

Under the GST/HST rules, supplies of financial services are generally exempt from GST/HST, including the issuance of insurance policies by an insurer. Such exempt financial services also include services by intermediaries that are considered to be “arranging for” a qualifying financial service (such as “arranging for the issuance policy”). Some services are excluded from the concept of arranging for a financial service, such as certain administrative services. The concept of “arranging for” a financial service has been the subject of various court decisions over the years.

“Arranging for” a financial service

The new guidance provides an overview of a few basic considerations used to help determine whether a particular service qualifies as a GST/HST-exempt service of “arranging for” a financial service, including:

  • The purpose of the supply — The insurance intermediary must bring together the parties involved in the supply of a financial service
  • The degree of involvement of the insurance intermediary — The insurance intermediary must be involved to a degree that will cause the supply of a financial service
  • The degree of reliance — The insurer must highly rely on the insurance intermediary’s services.

Similar to other tax rules, this determination is a question of fact.

GST/HST tax status of insurance intermediaries’ services

To determine the GST/HST tax status of their services and whether their services qualify as a GST/HST-exempt service of “arranging for” a financial service, the guidance advises insurance intermediaries to carefully review various elements of their services. To start this analysis, an insurance intermediary should:

  • Review their agreement(s)
  • Determine whether they are making a single supply or multiple supplies (e.g., how intertwined and connected are all the elements of a service?)
  • Determine the predominant elements of each of their supplies.

Making a single supply or multiple supplies
The new guidance reiterates that the characterization of each supply is made on a supply-by-supply basis, and that the preliminary step is to determine whether the intermediary is making a single or multiple supplies.

Some insurance intermediaries may have more than one agreement with the insurers. In particular, the new guidance clarifies that the existence of two separate agreements does not automatically indicate that there are two separate supplies. An insurance intermediary may provide a single supply under two or more related agreements. This concept may be difficult to determine as each agreement may include different objects and goals.

Predominant element of the supply
To help determine the predominant element of a supply, an insurance intermediary must generally review all the elements included in that supply using a holistic approach. Based on the guidance, an intermediary must carefully review all the relevant agreements and also consider the perspective of the recipient and the purpose of the supply to the insurer. The CRA describes a predominant element as an element that is critical to the commercial efficacy of the supply. Similar to the agreements, more than one predominant element may exist in some cases. In such a case, the new guidance states that all the predominant elements must be considered “as a whole” to determine the “essential character” of the supply. The predominant element is generally used to determine if a supply of a service qualifies as a GST/HST-exempt arranging for a financial service.

Various examples in new guidance

The new guidance includes seven helpful examples of services provided by various insurance intermediaries. Examples 1 to 4 apply the foregoing principals to the following entities:

  • A managing general agent promoting and selling the insurer’s life and health insurance policies
  • A third-party administrator developing an employee benefit plan to market to employers
    A corporation, acting on behalf of an insurer, distributes and manages travel insurance policies
  • A corporation that is a third-party administrator sells and renews group life and health insurance policies – under two different agreements

Examples 5 and 6 deal with car replacement insurance policies (also known as gap insurance) while example 7 deals with insurance claims adjudication and settlement system.

KPMG observations

Although the examples in the new guidance may help insurance intermediaries determine the GST/HST tax status of their supplies, this determination may be difficult where their services have more than one predominant element. Also, intermediaries may find it difficult to apply certain concepts in the new guidance, such as “inextricably intertwined”, “integrally connected” and “highly relies”.

We can help

For more information, contact your KPMG adviser or one of the following Indirect Tax professionals:

Information is current to August 8, 2023. 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

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