CADA recently won a major tax case involving HST and insurance.

Ruling Made on Canadian HST and Insurance Income

The Canadian Automobile Dealers Association (CADA) recently won a major tax case involving HST and insurance, according to the RV Dealers Association of Canada. The case findings will have an impact on RVDA of Canada dealer members that provide insurance products to customers. CADA is the national association representing franchised new car dealers in Canada.

CADA’s Legal Action Fund supported a dealer case before Federal Tax Court, which involved a dealer who had been assessed for HST on insurance commissions received. CADA’s legal position is that the insurance commissions received by their dealers are HST-exempt similar to the fees received for “arranging for” a financial service. In contrast, the CRA’s position has been that HST applies to insurance commissions received by dealers.

Specifically, CADA supported the case involving a dealer, Applewood Holdings. The case was heard by the Tax Court of Canada in early November 2018. In mid-November, the Tax Court released its judgment agreeing that the insurance commissions were HST-exempt. Importantly, CRA had until mid-December 2018 to appeal the decision to the Federal Court of Appeal. This week, the RVDA of Canada has been in contact with CADA as the association announced that CRA has chosen not to appeal the Applewood case to the Federal Court of Appeal.

While each tax case is fact specific, this ruling by the Federal Tax Court should provide clarity for CRA actions on insurance for RVDA dealers facing similar audits.

The RVDA of Canada has stated that it will continue to work with CRA officials to ensure clarity on this file and to make sure that auditors are well informed.

Got a news tip? Contact David MacNeal