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Earlier this year, brokers got a scare when CRA issued a notice that potentially applied GST/HST to brokering activities. Prior to this, mortgage broker services had long been one of the many exempt financial services.

Since that time, CAAMP (the industry’s trade group) has advocated steadfastly to protect the exemption.

One of the things CAAMP did was engage tax expert, KPMG, for consultation on the matter. gst-hst-mortgage-broker-commissions KPMG has since issued this advisory.  Below is the gist of it…

The most recent development in all this came on June 30. That’s when the Department of Finance issued these revised Explanatory Notes.

These explanations confirmed that “arranging for” the issuance of a mortgage loan does not constitute a GST/HST taxable service.

But what does “arranging for” mean?

KPMG says that CRA bases the definition on five measures:

  • The broker’s degree of direct involvement
  • The broker’s time expended 
  • The degree that borrowers & lenders rely on the broker
  • The intention of the broker’s activities
  • The broker’s normal activities in the mortgage industry

(Click here for KPMG’s full analysis)

In essence, KPMG confirms that brokers who actively process and submit deals to lenders in exchange for a commission on closing, are exempt from GST/HST.

On the other hand, consultants who merely refer clients to brokers, with little other involvement, are not GST/HST exempt.  KPMG suggests that CRA could apply this non-exempt definition to certain agents, depending on the circumstances. For that reason, KPMG suggests brokers and consultants/agents “review the nature of their service agreements, the nature of their services, and the facts under their particular circumstances.”

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