Headquarter`s Excise Rulings severed letters Headquarter`s Excise

January 19, 2006
August 2005 — Headquarter's Excise Rulings severed letters
Headquarter's Excise and GST/HST Rulings severed letters - August 2005
Date:
1er mars 2005
RITS/No:
50105
File/No:
11601-3;
HEK52100-4
Subject:
Demande de renseignements concernant l'utilisation du combustible à des fins
détournées
LTA 23(9.1);
Reference: LTA 64;
LTA 2 combustible diesel
Please note that the following document, although correct at the time
of issue, may not represent the current position of the Agency. /
Veuillez prendre note que ce document, bien qu'exact au moment
émis, peut ne pas représenter la position actuelle de l'Agence.
Direction de l'accise et des décisions de la TPS/TVH
Place de Ville, tour A, 15e étage
320, rue Queen
Ottawa (Ontario) K1A 0L5
XXXXX
XXXXX
XXXXX
Numéro de cas : 50105
1er mars 2005
Objet : INTERPRÉTATION DE LA TAXE D'ACCISE
Demande de renseignements concernant l'utilisation du combustible à
des fins détournées
XXXXX,
La présente fait suite à votre lettre XXXXX concernant l'application de la taxe
d'accise aux transactions de votre cliente. Votre lettre a été transmise à l'Unité de
la taxe d'accise à Ottawa pour que nous y répondions. Nous nous excusons de
notre réponse tardive.
Vous avez posé plusieurs questions sur l'application de la taxe d'accise
relativement au combustible utilisé à des fins détournées. Nous répondrons à
chaque question dans l'ordre présenté dans votre lettre.
Question no 1 - Un compte " J " permet-il à son titulaire d'acheter ou d'importer
du carburant exonéré de la taxe d'accise? À quoi sert un compte " J "?
Un compte " J " est un compte administratif établi par l'Agence du revenu du
Canada pour faciliter le paiement de la taxe d'accise lorsque l'huile à chauffage
exonérée de la taxe d'accise est revendue ou utilisée dans des conditions
taxables. Un compte " J " ne permet pas à un client d'acheter ou d'importer du
combustible diesel exonéré de la taxe d'accise.
Question no 2 - Le titulaire d'un compte " J " est-il considéré comme un fabricant
en vertu de la Loi sur la taxe d'accise (LTA)?
Le titulaire d'un compte " J " n'est pas considéré comme un fabricant aux fins de
la LTA.
Question no 3 - Quel article de la LTA impose la taxe d'accise sur l'huile à
chauffage utilisée à des fins détournées?
Le paragraphe 23(9.1) de la LTA stipule ce qui suit :
Lorsque du combustible autre que de l'essence d'aviation a été acheté ou importé
à une fin pour laquelle la taxe imposée par la présente partie sur le combustible
diesel ou le carburant aviation n'est pas payable et que l'acheteur ou l'importateur
vend ou affecte le combustible à une fin pour laquelle il n'aurait pas pu alors
l'acheter ou l'importer sans le paiement de la taxe au moment de l'achat ou de
l'importation, la taxe imposée en vertu de la présente partie sur le combustible
diesel ou le carburant aviation le devient au moment où il vend ou affecte le
combustible :
a) lorsque le combustible est vendu, au moment de la livraison à
l'acheteur;
b) lorsque le combustible est affecté, au moment de cette affectation.
Par conséquent, lorsque l'huile à chauffage exonérée de la taxe d'accise est
vendue dans des conditions où le combustible ne peut pas être acheté ou importé
sans être assujetti à la taxe d'accise, la taxe est payable par la personne qui vend
ou affecte le combustible.
Question no 4 - Quel article de la LTA établit la présomption que l'huile à
chauffage revendue pour utilisation à des fins détournées cesse d'être de l'huile à
chauffage et, par conséquent, devient assujettie à la taxe d'accise?
L'article 2 de la LTA définit le combustible diesel comme suit :
" combustible diesel " s'entend notamment de toute huile combustible qui peut
être utilisée dans les moteurs à combustion interne de type allumage par
compression, à l'exception de toute huile combustible destinée à être utilisée et
utilisée de fait comme huile à chauffage.
Une fois que l'huile à chauffage est utilisée à des fins détournées, elle n'est plus
destinée à être utilisée et n'est plus utilisée de fait comme huile à chauffage. La
définition susmentionnée s'applique et, par conséquent, l'huile à chauffage est
assujettie à la taxe d'accise, sauf si elle est exonérée par une autre disposition de
la LTA.
Question no 5 - Dans le cas où l'huile à chauffage est utilisée à des fins
détournées, pouvez-vous préciser quel article de la LTA stipule la façon de
calculer la taxe et le taux applicable?
Utilisée à des fins détournées, l'huile à chauffage est considérée comme du
combustible diesel. Le paragraphe 23(1) impose la taxe d'accise sur les produits
mentionnés à l'annexe 1 de la LTA, au taux indiqué. Conformément à l'article 9.1
de l'annexe 1 de la LTA, le combustible diesel est imposé au taux de 0,04 $.
Question no 6 - Quand la taxe d'accise devient-elle payable sur l'huile à chauffage
utilisée à des fins détournées dans des conditions taxables?
Le paragraphe 23(9.1) stipule que la taxe est payable sur l'utilisation détournée
de l'huile à chauffage par la personne qui vend le combustible au moment de la
livraison à l'acheteur.
Les observations qui précèdent représentent notre opinion générale à l'égard du
sujet de votre lettre. Les modifications proposées à la Loi sur la taxe d'accise, si
elles étaient promulguées, pourraient avoir des conséquences sur l'interprétation
fournie dans la présente. Les commentaires présentés ne sont pas des décisions
et, conformément aux lignes directrices énoncées dans la section 1.4 du chapitre
1 de la Série des mémorandums sur la TPS/TVH, ne lie aucunement l'Agence du
revenu du Canada à l'égard d'une situation particulière.
À titre d'information, vous trouverez ci-joint un exemplaire de la section 1.4 du
chapitre 1 de la Série des mémorandums sur la TPS/TVH.
Si vous avez des questions ou si vous avez besoin de clarification sur ce qui
précède, n'hésitez pas à communiquer avec moi au (613) 954-6718.
Veuillez agréer, XXXXX, l'expression de mes sentiments distingués.
Darren Weiner
L'Unité des taxes d'accise,
Division des droits et taxes d'accise,
Direction de l'accise et des décisions de la TPS/TVH,
Headquarter's Excise and GST/HST Rulings severed letters - August 2005
Date:
March 3, 2005
RITS/No:
58167
File/No:
11601-3;
HEK File 52200-1
Subject:
Manufacturing Activities for Excise Tax Purposes
Reference: ETA Part III
Please note that the following document, although correct at the time
of issue, may not represent the current position of the Agency. /
Veuillez prendre note que ce document, bien qu'exact au moment
émis, peut ne pas représenter la position actuelle de l'Agence.
Excise Duties and Taxes Division
20th Floor, 320 Queen Street
Ottawa, Ont. K1A 0L5
XXXXX
XXXXX
XXXXX
XXXXX
RITS No. 58167
March 3, 2005
XXXXX
Re: Manufacturing Activities for Excise Tax Purposes
Dear XXXXX:
This is in reply to your facsimile message XXXXX in which you seek clarification of
your compliance obligations pursuant to the Excise Tax Act ("ETA").
Our comments are set out below.
Information Provided
1. You operate a retail jewellery business in which you sell single diamonds and
diamond jewellery. You currently hold a manufacturer's excise tax license and
have been remitting excise tax for approximately two years.
2. Your activities in your jewellery business are more specifically described below:
z
z
z
purchase finished (i.e. cut and polished) single diamonds and sell in your retail
store;
purchase finished diamond stud earrings and diamonds rings and sell in your
store;
supply finished diamonds (from your own inventory) to manufacturers in
XXXXX who produce rings and pendants, which you sell in your retail store.
Question
Are you required to hold a manufacturer's excise tax license, in view of the
activities in which you are engaged in your retail jewellery business?
Answer
General Rules
Pursuant to subsection 23(1) of the ETA, there is an excise tax on the
manufacture or production in Canada or importation into Canada of goods listed in
Schedule I of the ETA. Goods listed in Schedule I include clocks and watches
having a value of $50 or more; articles made in whole or in part of semi-precious
stones; and jewellery, precious and semi-precious stones and goldsmiths and
silversmiths products (excluding gold-plated or silver-plated ware for the
preparation or serving of food or drink.)
On February 23, 2005, the Minister of Finance proposed in his Budget that the
excise tax on jewellery, etc. would be phased out over a four year period.
Effective February 24, 2005, the excise tax rate would drop from 10% to 8%, and
continue to drop by 2% every March 1 thereafter, until March 1, 2009, when the
excise rate would be 0%.
It must be emphasized that this Budget proposal affects only the rate of excise
tax on jewellery. There will be no change with respect to the structure or
operation of the excise tax on jewellery during the four year phase-out period.
During this period, licensees must comply fully with their legal obligations under
the Excise Tax Act. That is, they must self-assess on their taxable sales, file
regular returns and remit regular returns.
Pursuant to subsection 23(2) of the ETA, the excise tax is payable by the
manufacturer or the wholesaler or the importer on importation into Canada.
"Manufacturing" is not defined in the ETA. However, the courts have provided
guidelines that help define those activities that would be affected. The courts have
stated that any activity that gives new forms, qualities or properties to raw or
prepared materials is considered manufacturing.
Further, in the ETA, "manufacturer or producer" includes what is referred to as a "
legal manufacturer". This is a person who "......owns, holds, claims or uses any
patent, proprietary, sales or other right to goods being manufactured, whether by
them, in their name or for or on their behalf by others, whether that person, firm
or corporation, sells, distributes, consigns or otherwise disposes of the goods or
not."
As a general rule, persons who manufacture goods that are subject to excise tax
are required to operate under a manufacturer's excise tax license when the sales
value of the taxable goods is over $50,000 per year.
Licensed manufacturer's may purchase or import "partly manufactured goods"
excise tax free. "Partly manufactured goods" are goods that are to be
incorporated into and form a component part of articles that are subject to excise
tax.
Application of Rules to Your Business
You must purchase single finished diamonds for resale and other finished
jewellery on an excise tax paid basis. You would not be considered a
manufacturer with respect to these activities and, thus, the manufacturers of
these goods must charge excise tax on them when they are sold to you.
However, you will be considered a "legal manufacturer" with respect to the rings,
pendants, etc. that are manufactured on your behalf by others. Therefore, if your
sales of these goods exceed $50,000 per year, you must hold a manufacturer's
excise tax license and collect the 8% excise tax (or excise tax at the applicable
rate, as announced in the February 23, 2005, Budget proposals) on these sales.
You may use your excise tax license to purchase these finished rings, pendants,
etc. excise tax free from the physical manufacturer. Again, when you sell these
goods in your retail store, you must collect the excise tax.
Single finished diamonds purchased by you and supplied as inputs for the goods
for which you are a "legal manufacturer" must be bought on an excise tax paid
basis. You can then claim a credit on your tax return for the excise tax paid on
these diamonds. (Note: these single diamonds are not considered "partly
manufactured goods", eligible to be purchased excise tax free, because such tax
relief is not available to retail jewellers having no manufacturing premises.)
We are providing you with this interpretation letter that sets out our general views
with respect to the subject matter of your inquiry. Future amendments to the
ETA, if enacted, could have an effect on the interpretation provided herein. This
letter is not a ruling and, in accordance with the guidelines in section 1.4 of
Chapter 1 of the GST/HST Memorandum series, does not bind the Canada
Revenue Agency with respect to a particular situation.
If you have any further questions or require clarification of the above matter,
please do not hesitate to contact a member of my staff, Pauline Greenblatt, at
telephone number (613) 957-1140 XXXXX.
Yours truly,
Doug Rollins
Manager
Excise Taxes
Excise Duties and Taxes Division
Excise and GST/HST Rulings Directorate
Headquarter's Excise and GST/HST Rulings severed letters - August 2005
Date:
March 17, 2005
RITS/No:
59196
File/No:
11601-3;
HEK File 52200-1
Subject:
Excise Tax Rates on Jewellery, etc.
Reference: ETA Part III
Please note that the following document, although correct at the time
of issue, may not represent the current position of the Agency. /
Veuillez prendre note que ce document, bien qu'exact au moment
émis, peut ne pas représenter la position actuelle de l'Agence.
Excise Duty and Taxes Division,
Tower A, 20th Floor, Place de Ville,
320 Queen Street, Ottawa, ON,
K1A 0L5
RITS No. 59196
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
XXXXX
March 17, 2005
Dear XXXXX:
Subject: Excise Tax Rates on Jewellery, etc.
I am writing in regard to our meeting at our offices in Ottawa XXXXX. At that
time, you requested our approval of a 20% reduction in your current effective
excise tax rates to reflect the drop in excise tax rates from 10% to 8%, as
announced in the Federal Budget of February 23, 2005 ("the Budget"). Further,
you proposed using these reduced effective excise tax rates for the period
February 24, 2005 to March 1, 2006 ("the period").
As outlined in the Excise Tax Act ("ETA"), the only method provided for the
calculation of the amount of excise tax payable is to take the sale price of the
article, subtract any authorized discounts, and multiply that by the full rate of
excise tax in effect at that time. Anything other than this, including the use of an
effective rate, is merely a mathematical extension of this methodology, and can
only be made for convenience purposes.
Consequently, we are authorized only to confirm the use of excise tax rates set
out in the applicable provisions of the ETA, as amended by the Budget. This would
be 8% for the period referred to above.
Having said this, for your assistance, we reviewed your calculated effective tax
rates, using the alternative values to sale price authorized in our ruling XXXXX,
and the 8% excise tax rate currently in effect. (Please note that we applied the
8% tax rate to the selling price less the discount and we used the tax- included
method of calculation.) These effective rates are as follows:
Selling Price
Discount Effective Rate - 24 Feb./05
Under $3000
60%
2.96%
$3001- $7000
50%
3.70%
$7001 - $15000
30%
5.19%
More than $15000 30%
5.19%
To illustrate our calculations, a tax-included item with a sale price of $1000 would
be discounted by 60%, resulting in a value for tax purposes of $400. Applying the
8% tax rate on a tax-included basis yields $29.60 of excise tax (That is, 8/108 x
$400 = $29.60). This represents an effective tax rate of 2.96% (That is,
29.60/1000 = 2.96%).
We note that in the written submission you provided to us at our XXXXX meeting,
the basis of your calculation of your post-Budget effective rates involved the
reduction of your pre-Budget effective excise tax rates by 20%. We wish to advise
you that this method is not provided for in law. Rather, the correct method to
calculate the excise tax payable on a tax-included selling price is set out on Page
1, above.
We hope this information is of assistance to you. If you have any questions,
please do not hesitate to contact me at (613) 952-0178 or Pauline Greenblatt at
(613) 957-1140 XXXXX.
Doug Rollins
Manager, Excise Tax Unit
Excise Duty and Tax Division
GST/HST and Excise Rulings Directorate
Headquarter's Excise and GST/HST Rulings severed letters - August 2005
Date:
May 9, 2005
RITS/No:
60262
File/No:
11601-3;
HEK52100-0
Subject:
Jet Fuel Purchased for a Domestic Leg of an International Flight
Reference: ETA 68.17
Please note that the following document, although correct at the time
of issue, may not represent the current position of the Agency. /
Veuillez prendre note que ce document, bien qu'exact au moment
émis, peut ne pas représenter la position actuelle de l'Agence.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
XXXXX
XXXXX
XXXXX
Case Number: 60262
XXXXX
May 9, 2005
Subject: GENERAL INFORMATION LETTER
Jet Fuel Purchased for a Domestic Leg of an International Flight
Dear XXXXX:
Thank you for your letter XXXXX concerning the application of the excise taxes to
the operations of XXXXX. In your correspondence, you are requesting
confirmation of ruling XXXXX given by the Canada Revenue Agency (CRA) to your
client XXXXX. Specifically, you would like to confirm that jet fuel purchases by
XXXXX for a domestic leg of an international flight can be sold for use as Ships'
Stores.
The CRA would like to confirm ruling XXXXX given to XXXXX. Jet fuel purchases
for a domestic leg of an international flight can be sold for use as Ships' Stores
provided the following two conditions are met:
z
z
No passengers have deplaned or any cargo has been unloaded on the domestic
leg of the international flight; and
XXXXX must provide XXXXX with form K36A Ships' Stores Declaration and
Clearance Certificate that has been authorized by the Canada Border Services
Agency (Canada Customs) for such voyage.
XXXXX is eligible to file for a refund using form N15 Application for
Refund/Deduction of Excise Taxes to recover the excise taxes paid on the jet fuel
sales to XXXXX for use as Ships' Stores. A refund application must be made within
two years from the date fuel is sold to XXXXX.
We trust this addresses your letter. Should you have any further questions or
require clarification on the above matter, please do not hesitate to contact me at
(613) 954-6718.
Yours truly,
Darren Weiner
Excise Taxes Unit
Excise Duties and Taxes Division Division
Excise and GST/HST Rulings Directorate
Headquarter's Excise and GST/HST Rulings severed letters - August 2005
Date:
May 30, 2005
RITS/No:
60715
File/No:
11601-3;
HEK52100-0
Subject:
Application of Excise Tax on Gasoline Purchased For Use to Denature Ethyl Alcohol
Reference: ETA 2 gasoline
Please note that the following document, although correct at the time
of issue, may not represent the current position of the Agency. /
Veuillez prendre note que ce document, bien qu'exact au moment
émis, peut ne pas représenter la position actuelle de l'Agence.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
XXXXX
XXXXX
XXXXX
XXXXX
Case Number: 60715
XXXXX
May 30, 2005
Subject: EXCISE TAX APPLICATION RULING
Application of Excise Tax on Gasoline Purchased For Use to Denature
Ethyl Alcohol
Dear XXXXX:
Thank you for your fax XXXXX (with attachments), concerning the application of
excise tax to the operations of your client, XXXXX.
Statement of Facts
Our understanding of the facts, the transaction, and the purpose of the
transaction is as follows:
1. XXXXX is a Canadian corporation that carries on business as a manufacturer
and supplier of denatured ethyl and beverage grade alcohols.
2. XXXXX is not licensed under subsection 64(2) of the Excise Tax Act (ETA).
3. XXXXX is licensed under the Excise Act, 2001 (Canada). XXXXX is applicable to
XXXXX and licence XXXXX is applicable to XXXXX, being locations in XXXXX where
denatured ethyl alcohol is manufactured by XXXXX.
4. XXXXX purchases regular unleaded gasoline (the "Gasoline in Issue") from
XXXXX. XXXXX will be referred to individually as a "Supplier" and collectively as
the "Suppliers").
5. XXXXX uses the Gasoline in Issue to denature ethyl alcohol so that the
denatured ethyl alcohol is rendered unfit for human consumption. The denaturing
process is in accordance with the Excise Act, 2001 (Canada), the Denatured and
Specially Denatured Alcohol Regulations, and all other applicable current and
predecessor statutes and regulations.
6. XXXXX does not use the Gasoline in Issue in internal combustion engines.
7. After XXXXX uses the purchased Gasoline in Issue to denature ethyl alcohol,
the denatured ethyl alcohol is sold primarily to XXXXX, and also to certain other
purchasers (XXXXX and the other purchasers will be referred to individually as a
"Purchaser" and collectively and "Purchasers").
8. XXXXX understands that one or more of the Purchasers use the denatured
ethyl alcohol, purchased from XXXXX to produce a blended gas-denatured ethyl
alcohol fuel mixture, which is sold by the Purchaser to its customers.
Ruling Requested
Is the Gasoline in Issue a product subject to excise tax?
Ruling Given
Based on the facts set out above, we rule that the Gasoline in Issue is not a
product subject to excise tax.
XXXXX can purchase unleaded gasoline for use to denature ethyl alcohol exempt
of excise tax using the following blanket certificate:
"We certify that the gasoline which we will purchase from you during the period
from _______________ to _______________ is for use to denature ethyl alcohol
in accordance with the provisions of the Excise Act, 2001.
____________________________
Signature of Purchaser "
Additional Comment
We are of the understanding that XXXXX in the future may begin manufacturing
E85 gas-denatured ethyl alcohol grade gasoline. Should XXXXX begin this
undertaking, they may be required to obtain a licence under the ETA. The CRA
excise tax licensing group should be contacted at 1-866-330-3304 in the event
that XXXXX does require an excise tax licence.
This ruling is subject to the general limitations and qualifications outlined in
section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this
ruling provided that none of the above issues is currently under audit, objection,
or appeal; that there are no relevant changes in the future to the Excise Tax Act,
or to our interpretative policy; and that you have fully described all necessary
facts and transaction(s) for which you requested a ruling.
Should you have any further questions or require clarification on the above
matter, please do not hesitate to contact Doug Rollins, Officer, at (613) 9526178.
Yours truly,
Doug Rollins
Manager
Excise Taxes Unit
Excise Duties and Taxes Division Division
Excise and GST/HST Rulings Directorate
Headquarter's Excise and GST/HST Rulings severed letters - August 2005
Date:
August 22, 2005
RITS/No:
61650
File/No:
11601-3;
HEK52150-1
Subject:
Part I Tax on Insurance Premiums (Other Than Marine) Relief from Penalties and Interest
- Subsection 88(1) of the Excise Tax Act
ETA
ETA
Reference:
ETA
ETA
3 net premiums;
4(1);
5;
88(1); BR>ETA 79.03(1)
Please note that the following document, although correct at the time
of issue, may not represent the current position of the Agency. /
Veuillez prendre note que ce document, bien qu'exact au moment
émis, peut ne pas représenter la position actuelle de l'Agence.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 20th floor
320 Queen Street
Ottawa ON K1A 0L5
XXXXX
XXXXX
XXXXX
XXXXX
Case Number: CN61650
XXXXX XXXXX
August 22, 2005
Dear XXXXX:
Subject: EXCISE INTERPRETATION
Part I tax on insurance premiums (other than marine)
Relief from penalties & interest - Subsection 88(1) of the Excise Tax Act
This letter is in response to your letter XXXXX and our telephone conversations
concerning the application of Part I of the Excise Tax Act (the "Act") to insurance
endorsements.
All legislative references are to the Excise Tax Act and the regulations therein,
unless otherwise specified.
You have provided the following example, and have requested our comments with
respect to the application of Part I of the Act to the following scenario:
z
z
z
z
z
z
z
z
A client purchased a property/liability insurance policy with an effective date of
November 30, 2004, with a premium value of $100,000.
The policy was reported by the insurance broker on form B241 by March 15,
2005.
The Canada Revenue Agency ("CRA") invoiced the client directly by March 31,
2005, at the rate of 10%, for a total amount payable of $10,000.
The client paid $10,000 in Part I tax under the Act by April 30, 2005.
In June 2005, the client acquired an additional property that needed to be
insured.
An endorsement to the original policy (inception date, November 30, 2004)
was written for an additional premium in the amount of $20,000, on June 1,
2005.
The $20,000 premium was reported to the CRA as soon as possible by the
broker.
The CRA invoiced the client for the 10% tax payable in the amount of $2,000
plus interest (based upon the original policy inception date of November 30,
2004, which is reported to CRA by March 15 and must be paid by April 30,
resulting in interest from May 1 to present).
Interpretation Requested
You would like to know whether or not the Minister would exercise his discretion
under subsection 88(1) of the Act in the circumstances described above where the
additional premiums with respect to an insurance endorsement are payable in a
calendar year following the calendar year in which the initial premiums are paid or
payable.
Interpretation Given
Since fairness requests are handled on a case-by-case basis by the local Tax
Services Offices, we will not be providing you with a ruling on this matter.
However, we are pleased to provide you with the following interpretation and
comments.
During the course of our earlier telephone conversations, for purposes of your
example, I had expressed the view that the taxpayer would be liable to pay the
10% tax with respect to the net premiums (including the additional premiums
with respect to the endorsement) on or before April 30, 2005. I also presented
the view that amended Excise returns should be filed by the parties to report the
insurance endorsement for the 2004 calendar year on the basis that the
endorsement formed part of the "net premiums" payable in respect of the
insurance policy.
Upon further review, we concur with your earlier views that it would be
appropriate to report and pay the 10% tax under Part I of the Act for the
additional insurance policy endorsement in the Excise return due on or before
April 30 of the year following the calendar year in which the premiums with
respect to the additional endorsement were payable.
As such, for purposes of your example, where the additional insurance premiums
with respect to the $20,000 endorsement became payable in June 2005, the
broker should report this endorsement in its Excise tax return (Form B241) for the
2005 calendar year, which would be due on or before March 15, 2006.
Furthermore, the endorsement should be reported by the taxpayer in their Excise
tax return (Form B243) no later than April 30, 2006.
In circumstances where transactions are structured such that insurance
endorsements are used for purposes of inappropriately delaying the payment of
the 10% tax under Part I of the Act, the CRA reserves the right to (re)assess the
taxpayer on the basis that the endorsement(s) form part of the "net premiums"
with respect to the insurance policy, triggering a tax liability at an earlier point in
time.
With respect to your inquiry regarding relief from penalties and interest,
subsection 88(1) of the Act provides that the Minister may waive or cancel any
amount otherwise payable to the Receiver General under the Act that is interest
or a penalty.
If you would like more information regarding our position with respect to the
waiver or cancellation of penalties and/or interest, please see the attached GST
Memorandum 500-3-2-1 (the document should be read with such modifications as
the circumstances require to make it applicable for purposes of Parts I & VII of
the Act) which presents examples of situations where the CRA may consider
waiving or cancelling penalties and/or interest.
The foregoing comments represent our general views with respect to the subject
matter of your request. These comments are not rulings and, in accordance with
the guidelines set out in GST/HST Memorandum 1.4, Goods and Services Tax
Rulings, do not bind the Canada Revenue Agency with respect to a particular
situation. Future changes to the Excise Tax Act, regulations, or our interpretative
policy could affect this interpretation.
If you require clarification with respect to any of the issues discussed in this
letter, please call me directly at (613) 941-2348.
Yours truly,
Douglas Wood, CGA
Rulings Officer
Other Levies Unit
Excise Duties & Taxes Division
Excise and GST/HST Rulings Directorate
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