Insurance Review Spring 2012

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Page 8 of 23

A seven-year (retroactive) plague on cross-border reinsurance How can it be that Canadian insurers discover in spring of 2012 that they might now owe GST/HST plus penalty interest on a portion of (or, according to the Canada Revenue Agency, possibly all) reinsurance premiums paid to non-resident affiliates back to November 2005? This article looks at the events that were the genesis of the new imported supply rules, the appalling five- year delay between their effective date and passage into law, and the subsequently emerging CRA view that many cross-border reinsurance transactions in a seven-year window are now caught. The objective is to assist Canadian insurers in a brief self-examination for this new and (given the enormous amounts of tax involved) devastating plague. Sadly, infection is widespread, and has now begun to manifest itself in the outbreak of multi-million dollar GST assessments on the hapless victims. Insurance Review: A Canadian Perspective 7

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