Tax & Trade Blog

In a recently released GST/HST ruling, CRA seems to place a high bar on the exempt treatment of administrative services acquired by an Insurance Company in operating its insurance business.  In RITS 154220 (Application of GST/HST to Insurance-related Administrative Services), the CRA effectively takes the view that virtually all administrative services acquired by an insurer are viewed by CRA as excluded from the financial services exemption, and therefore taxable for GST/HST purposes.

An undisclosed agency exists if an agent enters into a contract with a third party on behalf of a principal, but does not reveal to the third party either the identity of the principal or the fact that the agent is acting on behalf of any principal.

When all else fails, taxpayers will often take the path of last resort to recover taxes, interest or penalties, called "Remission Applications", which are made under the Financial Administration Act (FAA).  Specifically, section 23 of the FAA confers discretion on the Governor in Council, exercisable on the recommendation of the Minister, to remit any tax or penalty when it considers that the collection of the tax would be “unreasonable or unjust” or that it is “otherwise in the public interest to remit the tax or penalty” – a hugely powerful discretion.

Yet the Canada Revenue Agency (CRA) tends to administer these provisions with an alarmingly tight fist, essentially allowing such applications only in instances of (their words):  extreme hardship, incorrect action or advice by the CRA, financial setback combined with extenuating factors, or the unintended result of legislation.

Instead of filing a notice of objection, a taxpayer may enter into negotiations with the Canada Revenue Agency (CRA) with the purpose of resolving tax issues in dispute.  When a settlement is reached, the CRA may request the taxpayer to sign a waiver, agreeing to the proposed changes to the assessment and confirming that the taxpayer will not appeal the assessment (made on the agreed terms) to the Tax Court of Canada (TCC).  Such waiver of right is expressly provided for in sections 301(1.6) and 306.1(2) of the Excise Tax Act (ETA) and sections 165(1.2) and 169(2.2) of the Income Tax Act (ITA).

Like any contractual agreements, undue pressure, lack of proper legal advice, or unconscionable bargains may void a settlement agreement. The Federal Court of Appeal (FCA) recently confirmed in Taylor v. The Queen (2012 FCA 148) that a waiver of right to object or appeal an assessment signed by a taxpayer pursuant to a settlement is valid and binding on the taxpayer.