(January 19 – 12:30 ET) – The Canada Customs and Revenue Agency is seeking comment on a policy statement defining GST for supplying financial services.

There must be a clear nexus between the activities of the intermediary and the supply of the financial service, says the CCRA. Whether the intermediary’s service can be considered to be a service of arranging for the supply of a financial service is a question of fact, says the agency. It will depend on the degree of involvement of the intermediary.

For example, says the CCRA, a domestic stockbroker does not have the right to buy shares on the foreign exchange. An investor will also need the help of a foreign broker who can trade on the foreign exchange. The domestic broker must work closely together with the foreign broker to complete the arranging for service. Similarly, an investor who uses a domestic broker to purchase shares listed on a domestic stock exchange trades with another domestic broker. “Once again, the two brokers must work closely together to complete the “arranging for” service.”

In general to qualify as a service of “arranging for” the supply of a financial service, the CCRA says that each of the following elements should be present:

1) the intermediary will help either the supplier or the recipient or both, in the supply of the financial service;
2) both the supplier and the recipient count on one or more intermediaries for assistance where necessary in the course of a supply of the financial service by the supplier;
3) the intermediaries should be directly involved in the process of the provision of the financial service by the supplier and/or the recipient and will therefore, expend necessary time and effort to ensure a successful supply of the financial service.

Comments are due by February 9.
-IE Staff