CRA responds to the new GST/HST legislative proposals on financial services
Alan Kenigsberg and Jean-Guillaume Shooner
On February 11, 2010, the Canada Revenue Agency (the "CRA") released GST/HST Notice No. 250 (the "CRA Notice") in response to the proposal to change the definition of "financial services" in the Excise Tax Act (the "Act") announced in a News Release and Backgrounder issued by the Department of Finance on December 14, 2009 (the "Backgrounder"). The Department of Finance stated that such proposal is intended to "clarify" and confirm the government's policy intent that certain services such as management, administration, marketing and promotional services do not constitute financial services and are therefore subject to GST/HST.
In the CRA Notice, the CRA states that the proposals to change the legislation "reaffirm the longstanding policy intent and provide certainty with respect to the application of GST/HST". Surprisingly, the CRA uses the CRA Notice to completely reverse a number of its own published positions with respect to what constitutes an exempt service of "arranging for" a financial service. Financial institutions and businesses dealing with financial institutions should carefully examine whether or not they are affected by these policy changes, and whether services previously considered exempt from GST/HST are now taxable.
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