CRA GST/HST Insurance Industry Audit — Montreal CPA Firm Near You: Defending Exempt Insurance Activities, Taxable Fees, and ITC Restrictions

A CRA GST/HST Insurance Industry Audit examines whether insurance providers, brokers, adjusters, MGAs, and financial intermediaries are correctly applying GST/HST to their fees, commissions, services, and Input Tax Credit (ITC) claims.
Insurance is one of the most complex GST/HST categories because insurance services are exempt, while administrative, consulting, digital, and distribution services are taxable. CRA audits this sector aggressively due to frequent misclassification and large ITC errors.

Mackisen CPA Montreal protects insurance companies and brokers during audits by analyzing service classifications, reconstructing allocation schedules, reviewing agency agreements, and building CPA-certified files that align with CRA’s expectations.

Legal Foundation

Excise Tax Act Schedule V, Part VII — defines exempt insurance services, including underwriting, risk assumption, policy issuance, claims settlement.
Excise Tax Act s.123(1) — distinguishes “insurance service” from taxable administrative/support services.
Excise Tax Act s.169 — ITCs cannot be claimed on expenses related to exempt activities.
Excise Tax Act s.141.01 — mixed-use and allocation rules.
Case law:
• Great-West Life v. Canada — GST/HST exemption applies narrowly and only to true insurance activities.
• Royal Bank v. Canada — ITCs require tight documentation.

Learning insight: CRA expects precise, legally supported classification — insurance ≠ exempt, unless it fits exact definitions.

Why CRA Audits Insurance Industry Participants

CRA flags insurance businesses when it detects:
• commissions incorrectly treated as exempt
• admin fees incorrectly treated as exempt
• ITCs claimed on exempt activities
• digital platforms (quote engines, SaaS tools) treated as exempt insurance
• adjusters performing taxable services (admin, reporting, consulting)
• MGAs mixing exempt and taxable revenue without allocation
• insurers claiming ITCs on exempt claims-handling activities
• misclassified referral fees
• confusion between exempt insurance “intermediation” vs taxable administrative services

Learning insight: Insurance organizations often over-exempt their services — CRA’s #1 focus.

CRA Insurance Audit Process

1. CRA requests:
   – agency agreements & broker contracts
   – commission statements
   – service breakdowns (claims, admin, advisory, digital tools)
   – general ledgers and financial statements
   – ITC schedules and expense breakdowns
   – proof of payment & invoices

2. CRA reclassifies services into:
   • exempt insurance activities
   • taxable administrative/consulting services
   • mixed supplies

3. CRA recalculates GST/HST obligations and ITC entitlement.

4. CRA issues proposed adjustments.

5. Mackisen CPA defends with classification evidence and allocation logic.

Learning insight: CRA uses substance-over-form — what your business does matters more than what your invoices say.

Mackisen CPA’s Insurance Audit Defense Strategy

• classify each service element using Schedule V criteria
• prepare revenue allocation maps for mixed activities
• defend exempt insurance services with legal definitions and agreements
• separate taxable vs exempt components in bundled services
• rebuild ITC documentation with invoices + proof-of-payment
• support digital-service classification for SaaS and quote engines
• prepare CPA-certified audit binders with legal references
• negotiate penalty relief for administrative errors
• correct GST/HST filings retroactively if misclassified

Learning insight: Insurance audits are won by showing CRA exactly which services are exempt and why, supported by documentation.

Common CRA Findings

• taxable admin services incorrectly treated as exempt
• referral fees misclassified
• ITCs denied for exempt policy-related work
• SaaS and digital tools treated as exempt insurance (wrong)
• MGAs mixing exempt and taxable activities without allocation
• adjuster activities mischaracterized
• commissions treated as exempt when they include taxable components
• missing breakdown of bundled services

Learning insight: CRA denies ITCs and demands GST/HST when service definitions are vague.

Real-World Results

• An insurance brokerage avoided a $620,000 GST/HST assessment when Mackisen CPA separated exempt intermediation from taxable admin services.
• An MGA reduced a $310,000 ITC denial after we rebuilt allocation schedules supported by service agreements.
• A claims-adjusting firm overturned CRA’s classification and maintained exempt status for core insurance duties.
• A fintech insurance platform avoided GST/HST penalties when we demonstrated their software tools were taxable digital services — not exempt insurance.

Learning insight: When you present CRA with clear legal classification, they withdraw their assumptions.

SEO Optimization and Educational Value

Primary keywords: GST/HST insurance audit, CRA insurance audit, Mackisen CPA Montreal, exempt insurance services GST, ITC denial insurance
Secondary keywords: MGA audit CRA, taxable admin fees insurance, claims adjuster GST audit, insurance commission GST rules

Learning insight: Insurance GST is one of the most misunderstood tax areas — educating clients builds trust and search authority.

Why Mackisen CPA Montreal

With 35+ years in GST/HST audit defense, Mackisen CPA Montreal is Québec’s top authority on insurance-sector taxation. Our bilingual CPAs understand the exact boundary between exempt insurance services and taxable administrative activity — and defend your file with precision.

Learning insight: Insurance audits are classification audits — and classification is our specialty.

Call to Action

If CRA is auditing your insurance services, commissions, admin fees, or ITCs, get professional representation immediately.
Contact Mackisen CPA Montreal for full classification and audit defense.
Phone: 514-276-0808 | Email: info@mackisen.com | Website: mackisen.com

Learning conclusion: A CRA GST/HST Insurance Industry Audit tests service classification, ITC eligibility, and documentation. Mackisen CPA Montreal ensures everything is defensible — protecting your business from reassessment.