Budget 2016 sees reinsurance tax break

The measure applies retroactively to any year ending after November 16, 2005

Ceding commissions and the margin for risk transfer from imported reinsurance services will no longer be subject to a self-assessed GST/HST, the 2016 federal budget states.

The margin of risk transfer will be defined as “the amount paid to the reinsurer for assuming the risk of potential future claims under the insurance policies that are in addition to the estimate of the net premium,” PwC points out.

Ceding commissions are defined as amounts paid by an insurer “for services acquired or performed exclusively in Canada… to issue and administer the insurance policies that were ceded to the reinsurer.”

The measure applies retroactively to any year ending after November 16, 2005.

Financial institutions who believe they have paid excess tax because of the changes may request the Minister of National Revenue to reassess how much tax they owe for a past specified year. They have one year after the budget receives Royal Assent to request the reassessment.

“These amendments are generally welcome by the industry and may require some action for insurers,” PwC writes.



 

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Transcontinental Media G.P.