This is the third sector in this series where an exemption depends on a classification, and the first where getting it wrong in either direction produces a real loss. A broker who over-charged tax has a problem as serious as one who under-charged, for a reason peculiar to this industry.
Key Takeaway
In the definition of financial service in subsection 123(1) of the Excise Tax Act, paragraphs (a) to (m) describe supplies that qualify and paragraphs (n) to (t) describe supplies excluded. Paragraph (l) covers arranging for a service in paragraphs (a) to (i) that is not caught by (n) to (t). Paragraph (r.4) excludes services preparatory to, or provided in conjunction with, such services where they consist of collecting, collating or providing information, or of market research, product design, document preparation, document processing, customer assistance, promotional or advertising services. Commentary describes CRA's continued focus on auditing financial intermediaries claiming exemption, and reports that in Zomaron the Tax Court confirmed arranging for is a low threshold, relying on the taxpayer's documentation. Because the payers are typically themselves largely exempt suppliers with restricted input tax credits, tax charged in error is a real cost to the customer rather than a wash.
A Note On Currency
Everything here is stated as verified in August 2026 and requires confirmation before reliance. This area has been actively litigated and CRA has issued administrative guidance since the decisions discussed here.
We have not verified the statutory definition against the Act, and we have not read any of the judgments described. Every account of the legislation and of the cases in this article comes from professional commentary, and the paragraph references are as those sources cite them.
The most recent commentary we rely on dates from 2023 and concerns a CRA notice on insurance intermediaries whose operative content we did not obtain[1]. Anyone with a live position should establish the current administrative guidance directly.
This is not tax advice. Whether a particular arrangement is exempt turns on the facts of that arrangement, which is exactly what the decisions discussed below demonstrate.
Two Lists
The structure of the definition, which governs everything else.
Commentary describes it plainly: in the financial services definition in subsection 123(1), paragraphs (a) to (t) fall into two categories. Paragraphs (a) to (m) describe supplies that qualify as financial services, and paragraphs (n) to (t) describe supplies that are excluded from the definition[2].
So a supply must appear on the first list and must not appear on the second.
That two-stage structure is the same shape this series identified in the health care exemption, where a supply had to fall within an exempting provision and then survive two separate exclusions. The drafting technique recurs wherever Parliament has wanted to exempt a core activity while taxing the services that surround it.
Two consequences follow, and this is our own analysis.
An activity that plainly looks like a financial service can still be taxable, because the exclusions operate on things that are otherwise within the definition. Being obviously financial in character settles nothing.
And the analysis is done supply by supply rather than business by business. A brokerage can make exempt supplies to one counterparty and taxable supplies to another, or both to the same counterparty under different arrangements.
That is the point most brokers miss when they describe themselves as being in an exempt industry.
Paragraph (l): Arranging For
The provision that most intermediaries depend on.
Commentary describes it as referring to arranging for a service that is referred to in any of the inclusionary paragraphs (a) to (i) and is not referred to in any of the exclusionary paragraphs (n) to (t)[1].
Note the structure carefully and this is our own emphasis.
Paragraph (l) does not describe the intermediary's own activity as a financial service in itself. It exempts the act of arranging for someone else's financial service.
So the analysis has two layers. There must be an underlying financial service within paragraphs (a) to (i), supplied by someone else, and the intermediary must have arranged for it.
Commentary describes the typical scenario in the insurance context as one where an intermediary is involved in the insurer's supply of a financial service such as the issuance or renewal of an insurance policy[1].
The same shape describes a mortgage broker. The lender supplies the financial service of lending money; the broker arranges for it.
What the word arranging requires is the entire question, and it is not defined. That is why the case law discussed below is the substance of this area rather than a gloss on it.
The Exclusions That Undo It
The provisions CRA relies on when it assesses, and they are drafted widely.
Commentary sets out paragraph (r.4) as excluding from the definition a service that is preparatory to the provision, or the potential provision, of a service referred to in any of paragraphs (a) to (i) and (l), or that is provided in conjunction with such a service, and that is either a service of collecting, collating or providing information, or a market research, product design, document preparation, document processing, customer assistance, promotional or advertising service or a similar service[1].
Another describes the same paragraph as excluding a supply that is an administrative service either preparatory to a financial service or provided in conjunction with a financial service[2].
Commentary also notes that paragraph (t) excludes certain services prescribed under regulations, and that a prescribed service for that purpose generally includes any administrative service[1].
Now read that list of excluded activities against what a broker actually does.
Collecting information from a client. Collating it into an application. Preparing documents. Processing documents. Assisting the customer. Promoting a product.
That is a complete description of a mortgage broker's working day, and every item on it is named in the exclusion.
That is why this area is contested. The exclusion does not describe some peripheral activity a broker might also happen to do. It describes the mechanics of brokerage itself.
Why This Is Genuinely Hard
The structural problem, offered as our own analysis.
Consider a mortgage broker who meets a client, gathers income and credit information, assembles an application, submits it to lenders, negotiates terms and sees the transaction to closing.
Described as a whole, that is arranging for the lending of money.
Described as a list of activities, it is collecting information, document preparation, document processing and customer assistance, all of which appear in the exclusion.
Both descriptions are accurate. They differ only in the level at which the activity is characterised.
That is the entire dispute in every case in this area, and it explains why the outcome so often turns on whether the tribunal looks at the transaction as a single supply or as a bundle of components.
Three consequences follow.
The way an intermediary describes itself matters more here than in most tax questions, because the characterisation is the issue.
Contracts that enumerate services performed, in the vocabulary of the exclusion, are doing the Crown's work. An agreement listing information collection, document processing and customer assistance as the deliverables has adopted the language of paragraph (r.4).
And an intermediary whose actual role is limited, referring a lead and doing nothing further, may genuinely fall within the exclusion. The analysis is not a formality that always resolves in the broker's favour.
CRA Audits This Population
The enforcement context, stated explicitly by professional commentary.
Commentary on two of the leading decisions says they highlight the Canada Revenue Agency's continued focus on auditing and challenging financial intermediaries that claim their services are a GST/HST-exempt financial service as opposed to taxable promotional, advertisement, or administrative service[3].
It also describes the exemption as one that both the CRA and taxpayers have struggled to interpret[3].
Two observations, ours.
A statement that the Agency has a continued focus on auditing a defined population is more specific than the general risk warnings that usually accompany contested areas. It identifies who is being looked at and on what issue.
And an area both the administrator and taxpayers struggle to interpret is one where an intermediary should expect its position to be examined on its merits rather than accepted because it is conventional in the industry.
The fact that every other brokerage treats these commissions as exempt is not evidence of anything, and in a population under audit focus it is not protection either.
What follows is what the courts have actually said, which is considerably more useful.
Rojas: Facilitated The Entire Transaction
The first decision, and the one closest to an ordinary Canadian small business.
Commentary describes the facts: the taxpayer was a real estate agent who also assisted clients in obtaining mortgages on the properties they wished to purchase[2].
On reassessment, the Minister said her mortgage services were in the nature of administrative services, primarily the collection of information for a mortgage brokerage firm, so the related commissions were not exempt. On appeal she argued that her services constituted arranging for the lending of money and were exempt[2].
Commentary reports that the Tax Court concluded in Rojas, 2016 TCC 177, that the taxpayer's mortgage-related services were exempt as financial services and not taxable as administrative services provided to a brokerage firm. It records the Court concluding that the taxpayer provided a single supply and facilitated the entire lending transaction[2].
Those two findings are the practical test, and this is our own reading.
Single supply answers the level-of-characterisation problem described above. Where the activities form one supply rather than several, the exclusion cannot be applied to individual components in isolation.
Facilitated the entire transaction answers what arranging requires. The intermediary was involved through to the outcome, not merely at the front end.
An intermediary whose involvement stops after a handover is in a materially different position from one who sees the matter to completion.
Applewood: The Car Dealership
The second decision, which extends the question beyond people who call themselves brokers.
Commentary records that in 2018 the Tax Court released the Applewood decision, which interpreted the meaning of arranging for a financial service in the context of the sale of insurance products by a car dealership[3].
We report the case as commentary describes it and did not obtain its outcome or reasoning beyond that description.
The significance for a general business audience, and this is our own analysis, lies in who the taxpayer was.
A car dealership is not a financial institution and would not describe itself as an intermediary. It sells vehicles. Selling credit protection, warranty-adjacent insurance and similar products alongside them is an ancillary revenue line.
Yet the characterisation of the commissions on those products raised precisely the question this article is about, and it did so for a business whose principal activity is entirely unrelated.
This publication examined dealership sales tax questions separately in its article on trade-ins, and the two exposures sit in the same business.
The general lesson is that the exemption analysis attaches to revenue lines, not to industries, which is the same conclusion this series reached about health practices. Any business earning commission for placing a financial product with a customer has this question, whatever else it does.
Retailers offering financing, equipment vendors arranging leases, travel businesses selling insurance and franchisors placing products with franchisees are all in that position.
Zomaron: A Low Threshold
The decision that most helped intermediaries, and the reasoning that made it useful.
Commentary describes the facts: Zomaron connected merchants that needed payment processing services with the acquirers who offered that service, and CRA assessed on the basis that tax was collectible on the fees Zomaron received from the acquirers. Zomaron said its services were exempt; the Crown said they were preparatory and promotional in nature, which are taxable services carved out of the definition[4].
The Tax Court held that Zomaron's services were exempt financial services, relieving it of any obligation to charge and collect tax on those services[5].
Commentary characterises the decision as a welcome one for intermediaries that may not fit within a traditional broker or agent type role, and states that it provides useful guidance on interpreting the exemption and confirms it is a low threshold to meet[3].
Two elements of that are worth isolating and this is our own emphasis.
The Crown's argument was the same one made in Rojas: that the work was preparatory and promotional. That is the standard assessing position in this area, and knowing it in advance tells an intermediary what its arrangements will be tested against.
And a low threshold is a genuinely useful characterisation. It means the exemption does not require the intermediary to be a regulated broker, to have authority to bind, or to occupy a formal agency role.
What it appears to require is real involvement in bringing the financial service about, which is the theme running through all three decisions.
An Emerging Framework
How commentary reads the decisions together.
It observes that when Zomaron is reviewed in light of the 2018 Applewood decision, a unified common law framework for applying the arranging for exemption is starting to emerge in the context of these non-traditional intermediaries[3]. It also notes that arranging for remains a nuanced concept[3].
Both halves of that matter, and this is our own reading.
A framework starting to emerge is not a settled test. Commentary written in 2020 describing an emergent framework is describing progress, not resolution, and CRA has since issued further administrative guidance.
What can reasonably be drawn from the three decisions, stated as our own synthesis rather than as a legal test, is a set of questions an intermediary should be able to answer.
Was there a single supply, or several separable ones.
Did the intermediary's involvement extend to bringing the financial service about, or stop at introduction.
Was the intermediary's role causal in the transaction occurring, or incidental to it.
Would the arrangement be accurately described as arranging for the underlying service, in ordinary commercial language, without straining.
None of those is authority. They are the questions the reported reasoning suggests will be asked, and an intermediary that can answer them from its own documents is in a much better position than one relying on industry convention.
The Documentation Point
The most actionable sentence in the commentary, and it concerns evidence rather than law.
It states that it is important to properly document the business arrangements, practices and procedures to support the exemption, and adds that in Zomaron, the existence of such documentation was a relevant factor upon which the Tax Court relied[3].
That is a court relying on documentation to establish what an intermediary actually did, and this is our own analysis of why it matters so much here.
In most tax disputes the facts are established by records of transactions: what was paid, when, to whom. Those records exist whether or not anyone anticipated a dispute.
Here the decisive fact is the nature of the role, which no transaction record captures. A commission payment looks identical whether it was earned by arranging a mortgage or by passing on a lead.
So the evidence establishing the role must be created deliberately, and by the time an assessment arrives the arrangements may be years old, staff may have changed and practices may have evolved.
The practical instruction is narrow and cheap: write down what the business actually does in each arrangement, in the language of arranging rather than of administration, and keep it current.
That means agreements describing the intermediary's role and its involvement through to completion, procedure documents describing the actual workflow, and a record of the analysis supporting the treatment.
All three exist in a well-run brokerage anyway. The discipline is in writing them to describe the role rather than to list tasks.
The Exposure Runs Both Ways
The feature that distinguishes this sector from the others in this series. This section is our own analysis.
In the health practice article and the dealership article, the error ran one way. A supplier treated a taxable supply as exempt, under-collected, and owed the difference.
Here both errors are live, because both classifications are commercially plausible and intermediaries genuinely make each mistake.
An intermediary that treated a taxable supply as exempt has under-collected and owes the tax.
An intermediary that charged tax on an exempt supply has over-collected from a customer who, for reasons explained below, probably could not recover it.
Both are real. And the second is more likely than most people assume, because the safe-looking response to an uncertain classification is to charge tax and remit it, on the reasoning that nobody is ever assessed for collecting too much.
In this industry that reasoning is wrong, and the two sections that follow explain the arithmetic of each direction.
Treated Exempt, Actually Taxable
The familiar exposure, quantified on our own figures.
Take an intermediary earning $125,000 a year in commissions, examined over a four-year period, at a thirteen percent rate.
Total commissions are $500,000, and the tax that should have been collected is $65,000.
The liability to account for that amount does not depend on having charged it, a principle this series has now encountered in four sectors.
Whether it can be recovered from the payer depends on who the payer is, and here the answer is more favourable than in the health context.
The payer is typically a lender, insurer, brokerage or acquirer rather than a consumer. It is a commercial counterparty with a continuing relationship, and an invoice for omitted tax is a conversation that can be had.
But the next section explains why that conversation is harder than it looks, because the payer generally cannot recover the tax either.
So an intermediary in this position is asking a commercial partner to absorb a real cost arising from the intermediary's own classification error, which is not a request that improves a relationship.
Charged Tax, Actually Exempt
The exposure that runs the other way, and the reason it is not academic.
On the same figures, an intermediary that charged tax on $500,000 of exempt commissions charged its payer $65,000 that was never due.
In an ordinary commercial supply chain that is a timing inconvenience. The recipient claims an input tax credit, recovers the amount, and the error washes out.
That is not what happens here, and this is the pivot of this section.
The payers in these arrangements are lenders, insurers and other financial businesses. Their own supplies are largely exempt, which means their entitlement to recover tax on their inputs is restricted.
We have not verified the mechanics of that restriction and do not describe them. The consequence, which follows from the structure of the system and is our own analysis, is that tax charged to such a payer is substantially a real cost rather than a recoverable one.
So an intermediary that over-charged did not create a wash. It imposed $65,000 of unrecoverable cost on its customer.
When the error is identified, that customer will want the money back, and the intermediary is exposed to a claim from a commercial counterparty rather than to an assessment.
The recovery of over-remitted tax from CRA is its own process with its own conditions and time limits, which we have not examined and which an intermediary should not assume is straightforward.
Why The Second Is Worse Here
A short section drawing the point out, because it inverts an intuition most advisors carry. This is our own analysis.
The default response to a genuinely uncertain sales tax classification, across most industries, is to charge the tax. The reasoning is that a registrant customer recovers it, the supplier is protected against an under-collection assessment, and the cost of caution is nil.
That reasoning holds wherever the customer can recover. It fails wherever the customer cannot.
In financial services the customer typically cannot, which removes the entire basis for the cautious default.
Three consequences follow for an intermediary.
There is no safe direction. The classification has to be right rather than conservative, because both errors are expensive.
The customer has an interest in the answer. A lender or insurer paying commissions is not indifferent to whether tax is charged, and may take a position of its own, which can conflict with the intermediary's.
And the analysis should be settled at the outset of a commercial relationship rather than left to each party's own treatment. Two parties to the same arrangement taking inconsistent positions is a visible discrepancy and an unresolved commercial exposure.
Where the amounts are material and the classification uncertain, this is the sort of question a ruling is designed for, on the same terms this series described in the health practice article.
The Cost Of Being Exempt
The other side of a favourable classification, which intermediaries consistently underweight.
An intermediary making exempt supplies charges no tax and, by the same token, faces restrictions on recovering tax paid on its own inputs.
We have not verified the mechanics. The order of magnitude is worth stating, and these figures are our own illustration.
Take a brokerage with annual premises rent of $36,000, software and systems of $18,000, marketing of $24,000 and professional fees of $12,000, being $90,000 of taxable inputs.
At thirteen percent the tax on those inputs is $11,700 a year, and across four years roughly $46,800.
To the extent the intermediary makes exempt supplies, that amount is absorbed rather than recovered.
Two observations, ours.
Exemption is not straightforwardly favourable. A brokerage with heavy marketing spend, expensive premises and substantial technology costs bears real tax on all of it, which is the same inversion this series identified for capital-intensive health practices.
And an intermediary with both exempt and taxable supplies has an allocation exercise, since recovery is available only to the extent inputs relate to taxable activity. That allocation should be documented before it is questioned, not after.
The Insurance Intermediary Notice
A more recent development, reported without its content.
Commentary from 2023 refers to a CRA notice on services provided by insurance intermediaries, describing it as focusing on paragraph (l) and considering a scenario where an intermediary is involved in the insurer's supply of a financial service such as the issuance or renewal of an insurance policy[1].
We did not obtain the notice's operative conclusions and have not summarised them.
What its existence indicates, and this is our own reading, is consistent with everything above.
A dedicated administrative notice, issued after the decisions discussed here and directed at a specific intermediary population, indicates that the Agency considers guidance necessary and that the area remains active.
It also indicates where attention is currently directed. Insurance intermediaries in particular should obtain the notice and have it applied to their own arrangements rather than relying on the case law alone, since administrative guidance issued after a decision frequently sets out how the Agency intends to apply it.
That is the single most useful step available to a business in that sector, and it is the same recommendation this series made to physicians in respect of the policy statement on medical examinations.
Who This Actually Affects
The population, which is wider than the financial sector. These are our own examples, drawn from the pattern the cases establish.
Mortgage brokers and agents, including real estate professionals who also arrange financing, as in Rojas.
Insurance brokers and agents, and managing general agents.
Payment intermediaries, including independent sales organisations and merchant service providers, as in Zomaron.
Retailers and dealers placing financial products alongside goods, as in Applewood, including vehicle, equipment, furniture and electronics sellers offering financing, credit protection or extended coverage.
Referral arrangements of every kind, where a business is paid for introducing customers to a financial provider. These are the most exposed, because a bare referral may genuinely be preparatory.
Deposit and investment intermediaries, and businesses paid by financial institutions for customer introductions.
Franchisors and associations receiving payments from financial providers for access to their members or franchisees.
The last two categories deserve a caution. A payment for access to a customer base, without involvement in any particular transaction, looks considerably more like promotion than like arranging, and an arrangement described in marketing terms will be read that way.
What The Auditor Actually Examines
The enquiry in practice, structured by the definition. This section is our own analysis.
The agreements, and specifically how the intermediary's role and deliverables are described. Language mirroring paragraph (r.4) is the first thing that will be found.
What the intermediary actually did, tested against whether involvement extended to bringing the financial service about or stopped at introduction.
Whether there was one supply or several, since the exclusion applies to components that are separable.
Revenue by arrangement, since a business can have exempt and taxable arrangements simultaneously and each requires its own analysis.
Referral-only income, which is the most exposed category.
Input tax credits claimed, against the proportion of activity that is taxable, where the business has both.
Consistency with the counterparty's treatment, since the payer's own returns reflect a position on the same supply.
The last item is worth emphasising and it is peculiar to this area. Because the payer is generally a larger and more heavily audited institution, the Agency may encounter the question from the other side first, and an inconsistency between the two parties is visible without either being audited directly.
What Records Survive
Agreements describing the role rather than listing tasks, framed in the language of arranging for the underlying service.
Procedure documentation showing the actual workflow, including involvement through to completion, which is what the Tax Court relied on in Zomaron.
A written analysis of the treatment for each revenue line, prepared once with an advisor and reviewed when arrangements change.
Evidence of involvement in individual transactions, such as correspondence with lenders or insurers, sufficient to show the role was causal rather than incidental.
Separate identification of referral-only income, which may require different treatment.
An input tax credit allocation method where the business makes both exempt and taxable supplies.
A record of the position agreed with each counterparty, so that inconsistent treatment is identified before an examination does.
What To Do
Classify each revenue line, not the business. The analysis is done supply by supply, and a brokerage can have exempt and taxable arrangements at the same time.
Read your own agreements against paragraph (r.4). Information collection, document preparation, document processing, customer assistance and promotion are all named in the exclusion, and a contract listing them has adopted the Crown's vocabulary.
Ask whether you facilitated the entire transaction. That is what the Tax Court found in Rojas, alongside a finding that there was a single supply.
Do not rely on being a traditional broker, or worry about not being one. Zomaron is described as confirming a low threshold and as assisting intermediaries outside traditional broker or agent roles.
Document the arrangements, practices and procedures. Commentary records that in Zomaron the existence of such documentation was a factor the Court relied on, and no transaction record captures the nature of a role.
Stop treating charging tax as the safe option. Your payer is generally an exempt supplier with restricted recovery, so tax charged in error is a real cost to them and a claim against you.
Settle the treatment with the counterparty at the outset. Inconsistent positions on the same supply are visible from either side's returns.
Isolate referral-only income. A bare introduction with no further involvement is the arrangement most likely to be genuinely preparatory.
Quantify what exemption costs you. On our illustration, $90,000 of annual taxable inputs carries $11,700 a year of tax that an exempt supplier absorbs.
If you are an insurance intermediary, obtain the CRA notice and apply it. Administrative guidance issued after the decisions frequently sets out how the Agency intends to apply them.
The Limits Of This Analysis
Several caveats matter. This is not tax advice; whether an arrangement is exempt turns on its own facts, which is precisely what the decisions demonstrate. Everything is stated as verified in August 2026 and requires confirmation; this area has been actively litigated and CRA has issued administrative guidance since the decisions discussed. We have not verified the statutory definition against the Act, and all paragraph references are as commentary cites them. We have read none of the judgments described, and our accounts of Rojas, Applewood and Zomaron come entirely from professional commentary; we did not obtain Applewood's outcome or reasoning beyond a description of its subject matter. We did not obtain the operative conclusions of the CRA notice on insurance intermediaries and have not summarised them. We have deliberately not described the mechanics restricting input tax credit recovery for financial institutions, nor the process, conditions or time limits governing recovery of over-remitted tax, having verified neither; the statement that tax charged to such payers is substantially a real cost is our own reasoning from the structure of the system. The four questions offered as a synthesis of the decisions are our own and are not a legal test. All arithmetic is our own, applies an assumed rate to hypothetical figures, and is illustrative only. The two-direction exposure analysis, the observation that the cautious default fails in this industry, the population list, the counterparty consistency point and the audit examination structure are our own analysis. This article does not address the special rules applying to financial institutions themselves, imported supplies, the selected listed financial institution regime, insurance premiums, or provincial insurance levies.
Frequently Asked Questions
Are broker commissions exempt from GST/HST?
What did the courts actually decide?
Is CRA actually looking at this?
Should we just charge tax to be safe?
What is the cheapest protective step?
We are not a financial business. Does this apply to us?
References
- Lexology. (2023). New GST/HST Notice on Services Provided by Insurance Intermediaries, on a CRA notice focusing on inclusionary paragraph (l), which refers to arranging for a service referred to in any of inclusionary paragraphs (a) to (i) and not referred to in any of exclusionary paragraphs (n) to (t); on the notice considering a scenario where an intermediary is involved in the insurer's supply of a financial service such as the issuance or renewal of an insurance policy; on exclusionary paragraph (r.4) excluding a service that is preparatory to the provision or potential provision of a service referred to in any of paragraphs (a) to (i) and (l), or that is provided in conjunction with such a service, and that is either a service of collecting, collating or providing information, or a market research, product design, document preparation, document processing, customer assistance, promotional or advertising service or similar service; and on exclusionary paragraph (t) excluding certain services prescribed under regulations, with a prescribed service generally including any administrative service. Note: professional commentary published through a syndication service; we did not obtain the notice's operative conclusions. lexology.com
- Tax & Trade Blog. Arranging For Financial Services, on the financial services definition in subsection 123(1) comprising paragraphs (a) to (t) in two categories, with (a) to (m) describing supplies that qualify and (n) to (t) describing supplies excluded; on paragraph (r.4) excluding a supply that is an administrative service either preparatory to a financial service or provided in conjunction with one; on the facts of Rojas, in which the taxpayer was a real estate agent who also assisted clients in obtaining mortgages, the Minister reassessing on the basis that her mortgage services were administrative in nature and primarily the collection of information for a mortgage brokerage firm, and the taxpayer arguing her services constituted arranging for the lending of money; and on the Tax Court concluding in Rojas, 2016 TCC 177, that the services were exempt as financial services and not taxable as administrative services, having found that the taxpayer provided a single supply and facilitated the entire lending transaction. Note: a Canadian tax practice publication; we have not read the judgment. taxandtradelaw.com
- Borden Ladner Gervais LLP. (2020). TCC Decision: Merchant Services Provider Exempt From GST/HST, on the 2018 Applewood decision interpreting the meaning of arranging for a financial service in the context of the sale of insurance products by a car dealership; on Applewood and Zomaron highlighting CRA's continued focus on auditing and challenging financial intermediaries that claim their services are exempt financial services as opposed to taxable promotional, advertisement or administrative services; on the exemption being one both CRA and taxpayers have struggled to interpret; on Zomaron being a welcome decision for intermediaries that may not fit within a traditional broker or agent type role; on Zomaron providing useful guidance and confirming that arranging for is a low threshold to meet while remaining a nuanced concept; on the importance of properly documenting business arrangements, practices and procedures to support the exemption, with the existence of such documentation being a relevant factor upon which the Tax Court relied in Zomaron; and on a unified common law framework starting to emerge for non-traditional intermediaries when Zomaron is read with Applewood. Note: a Canadian law firm publication from 2020; we have read neither judgment. blg.com
- Lexology / Borden Ladner Gervais LLP. TCC Decision: Merchant Services Provider Exempt From GST/HST, on CRA assessing Zomaron on the basis that tax was collectible on fees it received as consideration for its services to the acquirers; on the issue being whether Zomaron provided an exempt supply of arranging for a financial service by connecting merchants that needed payment processing services with the acquirers who offered that service; on Zomaron taking the position its services were an exempt supply; and on the Crown taking the position that Zomaron's services were preparatory and promotional in nature, which are taxable services carved out of the definition of financial services. Note: the same firm commentary as published through a syndication service. lexology.com
- Mondaq. (2020). TCC Decision: Merchant Services Provider Exempt From GST/HST, on the Tax Court holding that Zomaron's services were exempt financial services, relieving Zomaron of any obligation to charge and collect tax on its services, and on the decision restating and clarifying the arranging for test. Note: the same firm commentary as syndicated. mondaq.com
- Borden Ladner Gervais LLP. (2021, January). Noteworthy 2020 GST/HST Developments for the Financial Services Industry, on merchant payment processing services being an exempt supply of arranging for financial services and not a taxable administrative or marketing service in Zomaron Inc. v. The Queen; and on the Zomaron judgment considering what activities constitute arranging for financial services in a relationship between credit card payment processors, merchants and merchant service providers. Note: a Canadian law firm year-in-review publication. blg.com
This article is provided for general informational purposes and is not tax advice. The statutory definition has not been verified against the Act and paragraph references are as commentary cites them. The authors have read none of the judgments described and did not obtain the operative conclusions of the CRA notice referred to. The mechanics restricting input tax credit recovery for financial institutions, and the process for recovering over-remitted tax, are deliberately not described. All arithmetic is the authors' own and is illustrative only.