New GST/HST Notice On Services Provided By Insurance Intermediaries

In July 2023, the Canada Revenue Agency ("CRA") released GST/HST Notice 325 (the "Notice") with respect to services provided by certain insurance intermediaries. The Notice essentially makes official the 180-degree turn the CRA has taken with respect to the taxable status of commissions and other consideration payable to insurance intermediaries – including Third Party Administrators ("TPAs") and Managing General Agents ("MGAs") – after the industry requested clarification with respect to the tax treatment of a range of specific scenarios.

Background

In a 2019 technical interpretation, the CRA had stated that the predominant nature of the supply made by an MGA was a management and promotional service to the insurer that was excluded from the definition of "financial service" in Part IX of the Excise Tax Act (Canada) ("ETA") and was therefore taxable (GST/HST Interpretation Case Number 194986, May 6, 2019). At the end of 2019, the tax authorities began