Loan Intermediary Services: Canada

Abstract

Financial services, such as lending, are generally exempt from Canadian GST/HST. Related activities such as arranging for loans or credit, and activities that are part of a single supply of a financial service are also exempt. The exemptions are definition-based, generally independent of the identity of the supplier and recipient, and subject to various exclusions—all of which pose challenges for identifying what constitute financial services. Financial services generally do not give rise to input tax credits; accordingly, suppliers who provide both exempt financial services and taxable supplies are generally required to apportion ITC claims based on the use of inputs in exempt and taxable activities. Financial service providers which acquire inputs abroad may be required to self-assess GST/HST under a comprehensive regime that applies broadly to third-party supplies as well as to inter-company allocations. Certain financial institutions with activities in multiple provinces are required to make adjustments to tax payable to reflect variations in provincial HST rates.