The Canadian Automobile Dealers Association (CADA) announced this week that it has won a major tax case involving HST and insurance.
According to a release from the Recreation Vehicle Dealers Association of Canada (RVDA Canada), the case findings will have an impact on 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 Inc. 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 important and highly significant ruling by the Federal Tax Court should provide clarity for CRA actions on insurance for RVDA dealers facing similar audits. The RVDA of Canada will now continue to work with CRA officials to ensure clarity on this file and to make sure that auditors are well informed.