ETSL68 - Frequently Asked Questions Regarding Part 1 of the Excise Tax Act
Why am I getting this information package?
This package is being sent to all persons identified as being a broker/agent, insurer, or individual who may have taxable insurance policies to inform them of their filing obligation regarding Part l of the Excise Tax Act.
Why haven't I received this package before?
In the past, we noticed that brokers/agents, insurers, and insureds were unclear of their obligation to file under Part l of the Excise Tax Act. In order to ease the burden on these individuals, this information package was prepared and initially sent in February 2006.
If you have not received this package before, this may be because we did not have your correct information on file.
When is the tax not applicable?
Brokers and agents are not required to report contracts of insurance that fall into the following classes:
- marine insurance;
- life insurance;
- personal accident insurance;
- sickness insurance;
- insurance against nuclear risk to the extent that the insurance is not in the opinion of the Commissioner available in Canada; or
- any other contract of insurance entered into after February 19, 1973 to the extent that the insurance is not, in the opinion of the Commissioner, available within Canada.
How do I know how much I owe?
If you are unsure of the amount payable, you will have to contact your broker/insurer and ask for the premium amount that was reported to the Canada Revenue Agency (CRA). Once you receive the premium amount, multiply the premium amount by 10% and this is the amount of tax you owe.
When will I receive a form?
Once the broker/insurer reports all applicable insurance policies, the CRA will enter this information into their system and the insured person identified by the broker/insurer will receive form B243, Excise Tax Return – Insured . Brokers/insurers must report this information by March 15 of the year immediately succeeding the effective dates of the taxable policies.
Where can I go to receive a form?
If you were reported by a broker/agent/insurer, you will receive form B243, Excise Tax Return – Insured by mail.
Please visit the CRA Web site at www.cra-arc.gc.ca/formspubs/menu-e.html for printable versions of the following forms:
- B241, Excise Tax Return – Broker
- B243, Excise Tax Return – Insured
- E638, Application for Exemption from Insurance Premium Taxes imposed under the Excise Tax Act – Part 1
- E638A Statement of Availability or Declination from Authorized Insurers – Tax on Insurance Premiums (Part 1 of the Excise Tax Act)
Please note that if a broker or agent has paid the tax on behalf of the insured person, Form B243 must still be completed and filed by the insured person.
How do I know which form to use if I am downloading from the Web?
Form B241 is used for brokers or insurers to report any client on whose behalf they placed a contract of insurance:
- with an insurer not incorporated under the laws of Canada or of any province or not formed in Canada;
- with any exchange having its chief place of business outside Canada or having a principal attorney-in-fact whose chief place of business is outside Canada; or
- entered into or renewed through a broker or agent outside of Canada.
Form B243 is used for the individual client to report the policy information to the CRA, including the policy number, amount of the premium and the amount of tax owing on each policy.
Form E638 is used when a client wishes to apply for an exemption from the 10% tax on insurance. Along with this completed form, a client is required to submit a copy of his/her policy along with five letters of declination from authorized Canadian insurers (or five completed E638A's) and a completed B243.
My broker is located in Canada, why am I receiving this package?
Although your broker may be located in Canada, they may have placed the insurance with an insurer not incorporated under the laws of Canada or of any province or not formed in Canada, an exchange having its chief place of business outside Canada or having a principal attorney-in-fact whose chief place of business is outside Canada. The CRA only requires taxable policies to be reported.
You may want to contact your broker and ask with what company and where your insurance was placed and why you were reported to the CRA.
If no broker/insurer reports me, am I still required to file a return and how will I get the form?
If no broker/insurer reports you and you purchased insurance subject to the tax, you are still required to report and pay the 10% tax.
Summerside Tax Centre
Canada Revenue Agency
275 Pope Road
Summerside, PE C1N6E7
Toll Free: 877-432-5472
What is form E638A, Statement of Availability or Declaration from Authorized Insurers – Tax on Insurance Premiums (Part l of the Excise Tax Act)?
This is a new form that has been introduced for the 2007 tax year. This form is currently not a mandatory form, but you may choose to use this form with Form E638. This form is to be completed by five authorized Canadian Insurers and submitted with the exemption form.
This form will assist the CRA to render a decision regarding the application for exemption.
There is no reference to reinsurance in the package.
As per Part l, Subsection 4(1) of the Excise Tax Act, reinsurance is not taxable and does not have to be reported and thus is the reason there is no reference to reinsurance in this package.
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