The Canada Revenue Agency (CRA) has issued a bulletin spelling out how GST rules apply to the business of insurance agents and brokers.
The CRA issued a new GST/HST memorandum last week that discusses the application of sales taxes to certain activities of insurance agents and brokers, replacing an earlier version of guidance that was issued back in August 1999.
“Insurance agents or brokers may be employees of an insurance company, an insurance agency or a brokerage firm, or they may be self-employed persons. They may be involved solely in offering insurance policies, or they may provide a variety of services including risk management, consulting or advisory services. Therefore, it is a question of fact whether they make supplies for GST/HST purposes, and whether those supplies are exempt, taxable or zero-rated,” it notes, adding that licensing status also affects the application of these taxes.
The bulletin then goes on to provide guidance about how various services are typically treated under the GST rules. For example, it says when an agent or broker arranges for a defined financial service, “the fee or commission received by the insurance agent or broker as consideration for the provision of the arranging for service would not be subject to GST/HST.”
However, it notes that services such as risk management, estate planning, or wealth management, services are not considered financial services; “these services for which a separate fee may be charged are taxable supplies for GST/HST purposes,” it says.