ITC Entitlement On Financial Services

Every so often, decisions from the Tax Court of Canada (the “TCC”) and the Federal Court of Appeal (the “FCA”) highlight the intricacies of the GST/HST regime – particularly for financial institutions. The recent decision in Northbridge Commercial Insurance Corporation v. The King (2025 FCA 83) is a prime example. The FCA has now referred the case back to the TCC for a third hearing, highlighting the complexity of input tax credit (“ITC”) entitlements related to insurance supplies.

Background

Northbridge Commercial Insurance Corporation (“Northbridge”) issued insurance policies to trucking companies operating in both Canada and the US. The core issue to be decided by the courts was the extent to which Northbridge could claim ITCs for GST/HST paid on general head office and overhead costs. This required categorizing its supplies under the Excise Tax Act (the “ETA”) as either “exempt supplies” or “zero-rated supplies.”