CRA GST/HST Financial Services Audit — Montreal CPA Firm Near You: Defending Exempt vs. Taxable Transactions and Mixed-Use ITCs

A CRA GST/HST Financial Services Audit examines whether your business correctly classified its activities as exempt financial services or taxable supplies, and whether you properly claimed — or did not claim — Input Tax Credits (ITCs).
Because financial services are mostly GST/HST-exempt, CRA aggressively audits institutions to ensure they are not claiming ITCs on exempt activity and that any taxable components are correctly reported.

This audit applies to:
• mortgage brokers
• insurance brokers
• investment advisors
• wealth management firms
• financial planners
• real estate finance companies
• loan corporations
• fintech platforms
• factoring companies
• payment processors

Mackisen CPA Montreal specializes in defending financial-service audits by analyzing service classifications, documenting commercial vs. exempt activities, verifying ITC restrictions, and reconstructing GST/HST logic under the Excise Tax Act.

Legal Foundation

Excise Tax Act Schedule V, Part VII — defines exempt financial services.
Excise Tax Act s.123(1) — differentiates “financial service” vs. “administrative service.”
Excise Tax Act s.169 — restricts ITCs for exempt activities.
Excise Tax Act s.141.01 — rules for mixed-use allocations.
Case law:
• Great-West Life v. Canada — exemptions must be interpreted narrowly.
• Royal Bank v. Canada — strict documentation required for ITCs.

Learning insight: In financial services, classification determines everything — and CRA interprets exemptions narrowly.

Why CRA Audits Financial Services Providers

CRA flags financial-services businesses when it detects:
• ITCs claimed on exempt services (most common)
• mixed-use revenue with no allocation
• administrative fees incorrectly treated as exempt
• commissions misclassified as taxable or exempt
• large capital purchases with ITCs incorrectly claimed
• payments processed for others (merchant services)
• supplies that look like financial services but are actually taxable support services
• real estate lending firms charging incorrect GST/HST
• fintech platforms selling digital services with unclear tax treatment

Learning insight: CRA assumes ITCs were overclaimed unless documentation proves allocation.

CRA Financial Services Audit Process

1. CRA requests:
   – contracts, service agreements
   – invoices and fee breakdowns
   – financial statements
   – ITC worksheets
   – GL details for revenue and expenses
   – proof of payment
   – customer agreements & commission structures

2. CRA classifies each service:
   • exempt financial service
   • taxable administrative service
   • mixed supply

3. CRA analyzes ITC eligibility based on allocation.

4. CRA verifies GST/HST charged (or exempted) correctly.

5. CRA issues proposed adjustments.

6. Mackisen CPA prepares classification and allocation defense.

Learning insight: CRA focuses on substance over labels — what the service is, not what you call it.

Mackisen CPA’s Financial Service Audit Defense Strategy

• classify every service using Schedule V and case law
• separate exempt vs taxable components
• build revenue allocation matrices for mixed-supply models
• recalculate ITCs allowed based on commercial-use percentage
• defend taxable fees (admin, consulting, digital) with proper invoicing
• prepare CPA-certified audit binders for CRA review
• correct GST/HST filings retroactively and negotiate relief
• support fintech and advisory firms with digital-service place-of-supply analysis

Learning insight: Financial-service audits are won with precise classification + clear allocation.

Common CRA Findings

• ITCs disallowed due to exempt activity
• commissions treated incorrectly as exempt/taxable
• payment processing treated as taxable digital service
• administrative services mischaracterized as exempt financial services
• mixed-use expenses not allocated properly
• GST not collected on taxable consulting or admin fees
• fintech SaaS platforms taxed incorrectly
• missing or invalid invoices

Learning insight: Every finding is a documentation or classification issue — and often fully defensible.

Real-World Results

• A mortgage brokerage avoided a $410,000 ITC denial after Mackisen CPA rebuilt exempt/taxable allocation and documented allowable ITCs.
• A wealth management firm reduced a $260,000 GST assessment when we reclassified advisory vs admin services using case precedents.
• A payment processor cleared a CRA audit after we proved it performed financial intermediation, not taxable SaaS.
• A fintech startup eliminated penalties by documenting customer location for taxable digital features.

Learning insight: CRA backs down when classifications are proven with law + logic + documentation.

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Learning insight: Clear, authoritative content improves search authority and client trust.

Why Mackisen CPA Montreal

With 35+ years of GST/HST audit expertise, Mackisen CPA Montreal is Québec’s leading authority on financial services GST/HST rules, exempt classifications, and ITC allocations. Our bilingual CPAs analyze your exact business model and build audit files that match CRA’s expectations.

Learning insight: Financial-services audits are won on classification — and classification is what we master.

Call to Action

If CRA is auditing your financial services, commissions, fees, or ITC claims, get expert representation immediately.
Contact Mackisen CPA Montreal for full GST/HST audit defense.
Phone: 514-276-0808 | Email: info@mackisen.com | Website: mackisen.com

Learning conclusion: A CRA GST/HST Financial Services Audit tests classification, allocation, and documentation. Mackisen CPA Montreal ensures everything is accurate, defensible, and fully compliant — protecting your business from reassessments.