Finance Minister clarifies GST proposals: broker commissions appear to remain exempt

The Department of Finance Canada has clarified its intent to define certain financial services that are subject to GST, suggesting insurance broker commissions will continue to remain GST-exempt.
A Canada Revenue Agency GST/HST Notice 250 in February 2010 caused some confusion when it suggested the government intended to apply GST to “facilitatory services,” defined in the notice as “preparatory to an actual or intended financial service.”
The fact that insurance brokers often engage in preparatory activities such as “agreeing to provide” or “arranging for” services critical to the design of an insurance product — services that the CRA no longer considers to be GST-exempt — created confusion as to whether broker commissions would no longer be considered GST-exempt (as they are now).
In its clarification, the department says the following services are not “financial services” and are therefore taxable under the GST: market research, product design, promotional services, advertising and the collection of information.
The Department of Finance Canada backgrounder makes it clear the facilitatory services listed above are not considered to be financial services [and hence subject to GST] precisely because “they do not constitute ‘the agreeing to provide, or the arranging for’ a financial service for the purpose of the definition of ‘financial service.’”
Since one of a broker’s many functions is to “agree to provide” or “arrange for” the services listed by the CRA for the purpose of securing insurance coverage for a client, broker’s commissions would appear to remain exempt from GST.
Finance Minister Jim Flaherty issued a press release and a backgrounder clarifying that the GST/HST Notice 250 was not intended to indicate any change in government policy.
“Businesses need clear GST rules,” Flaherty said in his statement. “The proposed changes [to the GST]…are designed to confirm our longstanding policy intent and restore the situation that existed prior to…court decisions. We are not imposing new taxes.”