Cross-Border Insurance Coverage – Don’t Miss April 30 Deadline for 10% Excise Tax

Cross-Border Insurance Coverage – Don’t Miss April 30 Deadline for 10% Excise Tax

Canadian Tax Adviser | KPMG

Some businesses are required to pay, by April 30, 2016, a federal tax of 10% of net premiums paid or payable if they’ve purchased insurance coverage outside Canada or were covered under a global insurance policy acquired by a parent company in 2015. Generally, the federal tax applies where the business or individual purchases coverage for risks in Canada directly, or where the coverage is obtained on their behalf by a third party. This tax could also apply where a business has insurance coverage with an insurer licensed in Canada but the broker or agent is outside Canada

These businesses and individuals may also be required to self-assess provincial taxes and levies on cross-border insurance coverage or multi-provincial insurance coverage. These provincial taxes and levies have specific rules and deadlines that are different from the ones that apply for the 10% federal tax.

April 30 deadline for 10% federal tax

The Excise Tax Act  requires a person resident in Canada, who enters into an insurance contract (or on whose behalf such a contract is entered into) against risk within Canada with an insurer that is not authorized under the laws of Canada or any province to transact the business of insurance, to pay a 10% tax on the net premiums paid or payable during the preceding calendar year. This rule also apply to a non-resident corporation carrying on business in Canada. For example, a corporation in Canada may be liable to pay the tax where the parent company acquired global insurance outside of Canada on behalf of the entire corporate group. Affected taxpayers must remit the 10% tax to the CRA by April 30

A business may also be required to self-assess the 10% tax on insurance premiums related to an insurance contract that is entered (or entered into on its behalf) through a broker or agent outside Canada with an insurer in Canada.

In general, the 10% federal tax does not apply to certain types of insurance, such as life, sickness or personal accident insurance and insurance against marine risks. The law also provides relief in some cases where a business can clearly demonstrate that the insurance is effectively not available in Canada. To qualify for this exemption, the business must file an exemption application with the CRA and provide specific information and supporting documentation.

Don’t forget provincial sales tax and insurance premium taxes

Buying insurance coverage from insurers not registered in a particular province may also lead to provincial tax liabilities for some businesses.

Three provinces currently apply a sales tax on certain insurance contracts (Quebec, Ontario and Manitoba). Similar to the federal rules, a business that enters into contracts with insurers not registered in the province may be required to self-assess a provincial sales tax on the related insurance premiums. The sales tax rates, remittance deadlines and related non-compliance penalties vary by province.

A business may also be liable to pay insurance premium taxes as the insured person where the coverage is in a territory or a province in which the insurer is not licensed (otherwise, the insurer is generally liable for these taxes). In some cases, the business may be required to pay an increased levy on some of these premiums. For example, Alberta imposes a levy of up to 50% of the premiums and up to 75% if the tax is paid late. Again, the insurance premium tax rates, rules and remittance deadlines vary by province and may be different than the ones for provincial sales taxes.

For more information, contact your KPMG adviser.

JPMorgan profit falls 8 per cent, fails key regulatory test

By Ken Sweet


JPMorgan Chase said Wednesday that its first-quarter profit fell more than 8 per cent from a year earlier and the bank tried to soothe investor concerns after it failed a key regulatory test designed to prevent another financial crisis.

First-quarter profit at JPMorgan, the nation’s largest bank by assets, was hurt by weak results at its investment-banking division and by loans to oil and gas companies that are now struggling to make payments because of low energy prices.

As JPMorgan was announcing its quarterly results Wednesday, the Federal Deposit Insurance Corporation and the Federal Reserve announced that it, as well as four other banks, failed to meet a regulatory requirement put in place after the financial crisis. They were required to come up with a plan, known as “living will,” to unwind their operations in the event of a bankruptcy or other upheaval in a way that would avoid triggering another broad financial meltdown.

Regulators called the banks’ plans “not credible” and gave them until Oct. 1 to come up with new plans or face more stringent requirements.

It was symbolic defeat for JPMorgan and its executives. JPMorgan was one of the few banks to weather the housing downturn and financial crisis and CEO Jamie Dimon has repeatedly touted the firm’s “fortress” balance sheet, which he says would protect it from any future crisis.

“We are going to do everything we can to fix this problem,” Dimon said in a conference call with reporters.

The regulators’ issues with JPMorgan appear to be tied more into the bank’s legal structure than its balance sheet. JPMorgan’s plan relies on moving money from foreign subsidiaries, which could be difficult in event of a global financial crisis.

JP Morgan Chief Financial Officer Marianne Lake told investors she did not expect that the bank’s results would be held back as it addresses regulators’ concerns. And investors did not seem to be concerned. Shares in New York-based JPMorgan & Co. rose $2.51, or 4.2 per cent, to close at $61.79 on Wednesday amid a broad rally in bank stocks.

Still, this latest regulatory issue comes at a difficult time for JPMorgan and other big banks. Profits and share prices have fallen in recent months because loans to energy companies have gone bad and the Fed signalled it will slow the pace of interest rate increases, which hurts bank profits. Despite Wednesday’s rally, the financial sector is the worst performing sector of the Standard & Poor’s 500 index this year.

JPMorgan said it earned $4.99 billion after payments to preferred shareholders in the first quarter. That compares to a profit of $5.45 billion a year earlier. On a per share basis, the bank earned $1.35, compared with $1.45 a year earlier.

The results beat analysts’ expectations of $1.26 per share, according to FactSet. That estimate typically excludes one-time items.

The bank had to set aside $719 million in the quarter to cover potential defaults of loans to oil and gas companies and materials and mining companies. JPMorgan, like most of its competition, made billions in loans to drilling companies when oil prices were near $100 a barrel. The price fell to a 12-year low to below $27 a barrel in the first quarter.

Net revenue at the bank totalled $23.24 billion, compared with $24.07 billion in the same period a year earlier.

The company said profit at its investment bank fell 22 per cent from the year before to $1.98 billion. Profit from its consumer bank rose 12 per cent to $2.49 billion.


Cdn bank fined $1.1 million for failing to report suspicious dealing

By Jim Bronskill


OTTAWA _ The federal anti-money laundering agency has levied a $1.1-million penalty against an unnamed Canadian bank for failing to report a suspicious transaction and various money transfers.

It is the first time the Ottawa-based Financial Transactions and Reports Analysis Centre of Canada, known as Fintrac, has penalized a bank and it’s being billed as a warning to thousands of other businesses.

Generally, the centre tracks cash flows linked to terrorism, money laundering and other crimes by sifting through millions of pieces of data annually from banks, insurance companies, securities dealers, money service businesses, real estate brokers, casinos and others.

In this case, Fintrac spokesman Darren Gibb said he cannot legally discuss details of the bank’s infractions, and the federal agency is exercising its discretion to withhold the identity of the financial institution, which recently paid the penalty of $1,154,670.

But Fintrac wants to send a strong message that it will take whatever measures are needed to encourage compliance with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.

The agency depends on a steady flow of reports about suspicious dealings, electronic fund transfers and large cash transactions in order to produce needed intelligence, Gibb said in an interview.

“The reporting to us is absolutely critical. Without those reports, Fintrac is out of business,” he said Tuesday.

“We’re going to be extra-diligent to ensure that entities are submitting suspicious transaction reports when they should be.”

Some 31,000 businesses across the country must furnish Fintrac with reports. The agency, in turn, provided 1,260 disclosures of financial intelligence to police and national security partners in 2014-15.

The penalty announcement comes amid heightened scrutiny of Canadian financial institutions due to publication of leaked files, known as the Panama Papers, about dubious global dealings.

The fine was levied against the bank for failing to report: an attempted or actual suspicious transaction; receipt of $10,000 or more in a single transaction; an electronic funds transfer of $10,000 or more to a destination outside Canada; receipt from outside Canada of an electronic funds transfer of $10,000 or more.

In addition, the bank was penalized for failing to apply written compliance policies and procedures that are kept up to date and approved by a senior officer.

Gibb said he could not divulge exactly how the unreported transactions came to Fintrac’s attention, nor could he discuss the nature of them.

“I can’t say to you that we’ve identified money laundering or terrorism financing. What I can say is that we’ve identified an entity that has not fulfilled its obligations” under the law, he said.

“The obligations are in place to ensure that we get the reporting that we need to provide financial intelligence to our partners.”

The Canadian Bankers Association declined to make anyone available for an interview.

In an emailed statement, the association said Canadian banks have a strong track record of compliance with the anti-money laundering regime, noting they process billions of transactions in Canada every year.

On the rare occasion when a problem arises, “a bank will take immediate steps to resolve the issue and ensure that it is in compliance going forward,” the association added.

Fintrac received 92,531 suspicious transaction reports from businesses across Canada in 2014-15, an 11 per cent increase over the previous year.

“Yes, we’ve made significant progress, and we’re pleased by that,” Gibb said. But he quickly added: “Some sectors still have some work to do.”


Report: Don’t unbundle advice fees from investment products

Report: Don’t unbundle advice fees from investment products

By Investment Executive

A new report is warning regulators to step cautiously when considering reforms to unbundle the cost of financial advice from investment products.

Some have raised concerns about the conflicts of interest that arise when investment advisers are paid different commissions depending where their clients invest their money.

However, the report by the University of Calgary’s School of Public Policy says there are better ways to deal with advisor conflicts of interest.

The report says countries that have unbundled the cost of advice from investments have seen fewer people seeking financial advice, especially those with small accounts.

They have also have seen an increase in the total cost of services for a large proportion of retail investors, the report by Pierre Lortie says.

It says any reforms that prompt investors to not seek professional help with the investments would be counterproductive in helping them save for retirement.


Large Canadian Insurer: iA Financial Group acquires Groupe financier Moreau

iA Financial Group, through its subsidiary National Financial Insurance Agency (NFIA), announced today the signing of an agreement to acquire the operations of Groupe financier Moreau, a life insurance agency with around 130 representatives.

This transaction comes as part of the growth strategy of NFIA, which supports an independent distribution network in retail insurance and wealth management. Groupe financier Moreau has offices in the greater Montreal area, located in the city’s suburbs to the north (Laval) and south (Brossard).

“We have worked with iA Financial Group’s teams for years. Our values focused on competence, professionalism and integrity are right in line with those demonstrated every day by these teams,” highlights Alain Moreau, President of Groupe financier Moreau. “For this reason, I am sure that the combining of our activities will be carried out in the simplest, most efficient manner possible for our clients, representatives and employees, and that everyone will come out ahead.”

“It is our pleasure to welcome Groupe financier Moreau’s representatives to our team of independent advisors and to now serve their clients as well. Alain Moreau’s extensive experience will be used in NFIA to develop and grow our business. With these new offices in the greater Montreal area, this acquisition consolidates our positioning in Quebec,” states Louis DeConinck, President of Investia Financial Services and head of NFIA.

The transaction closing date is planned for April 1, 2016, subject to normal closing conditions. After the transaction has been concluded, Groupe financier Moreau will be merged with NFIA. The impact of the transaction on earnings and capital is deemed non‐material and therefore not disclosed.

About National Financial Insurance Agency (NFIA)
National Financial Insurance Agency (NFIA) was founded in 1984 as an insurance general agency to help its advisors provide insurance solutions as part of a comprehensive financial plan. Contracted with Canada’s premier life insurance companies, NFIA offers its advisors access to a comprehensive suite of financial products and services enabling them to provide their clients with a vast selection of the very best products on the market.

About iA Financial Group
Founded in 1892, iA Financial Group offers life and health insurance products, mutual and segregated funds, savings and retirement plans, RRSPs, securities, auto and home insurance, mortgages and car loans and other financial products and services for both individuals and groups. It is one of the four largest life and health insurance companies in Canada and among the largest publicly traded companies in the country. iA Financial Group stock is listed on the Toronto Stock Exchange under the ticker symbol IAG.

SOURCE Industrial Alliance Insurance and Financial Services Inc.

Are You On Track Financially For 2016?

Are You On Track Financially For 2016?

On the eve of every New Year, Canadians often set a New Year’s resolution. This annual ritual sets many people on the path of a fresh start as they end the old year with a positive outlook for the new. On average, 6 out of 10 Canadians will have a resolution to pay off their debt. However, 84% of Canadians will fail at completing their original plan. As we are now nearly 3-months into 2016, are you one of the 84%?

Accountability is Key
When you know someone is checking in on your progress, certain choices that can negatively affect your financial health will be easier to avoid. Individuals who have money management, debt reduction or other financial related themes as their New Year resolution will need to work extra hard to stick to their objectives with the current economic situation in Canada, and Money Mentors is here to help hold you accountable. Now is the best time to start planning and making prudent decisions about your finances.

It takes a lot of self-discipline, time management, dedication, support, and reliable tools or resources for an individual to reach a comfortable financial position.

5 Tips to Ensure Your Financial Resolution Is A Success!
If your 2016 resolution is off to a rocky start, don’t despair! There are still 9 months left of the year, and we have some tips that will help you stay focused on the task at hand and be successful at your financial goals in 2016.

1. Get Organized – Do you have a clear picture of where you currently stand financially? For example, take a look at your income, investments, insurance, assets and debt. If you do not know your current financial position, it will be hard to achieve your resolution.

2. Set Financial Goals – Goals will help you stay focused on what you want to accomplish in 2016; whether it is paying down debt, starting an emergency fund, or starting to save for retirement. Ensure you prioritize your goals, because realistically you cannot achieve them all at the same time. Finally, remember goals need to be SMART: Specific, Measurable, Achievable, Realistic, and Time specific.

3. Create a Budget – A good budget helps you to be in control of your money. If you are unsure on where to start, start by keeping track of all your incoming and outgoing funds. Create spending categories such as food, entertainment, credit card payments and rent. You may want to eliminate or cut back on certain purchases if your debt exceeds more than 40% of your income.

4. Start Saving – Start saving for your irregular expenses, emergency fund or towards retirement wherever you can. For example, if you receive a raise in pay at work or a tax refund after filing your 2015 taxes, you can save that money! Are there opportunities to cut back on some of your expenses or bills? Examples include cell phone bills, cable, unnecessary credit card interest, eating outside and grocery. Try setting aside one day each week where you do not spend money and save what you may have spent that day.

5. Pay Down Your Debt – Stop using your credit card unless you know you can pay for the purchases you put on the card before you get your monthly bill. You can also try talking to your bank to reduce your credit card interest rate. Always try to find some areas to cut back on in your budget so you can pay extra towards your debt, or into your savings. You could also generate additional funds by selling some things that you do not need. The New Year is a great time for a garage sale.

Always remember that nothing worth doing is ever easy. We are only in March, meaning you still have time to live up to your financial objectives. Rather than feel guilty or ashamed of your old habits, ensure you work hard to achieve your New Year’s Resolution and you will be set for financial stability in 2016 and beyond. If you would like to learn more about budgeting, tackling debt, or growing your retirement savings, our Free Financial Fitness Courses will provide you valuable advice.

Money Mentors is the only Alberta-based, not-for-profit credit counselling agency. Through a number of services, we help families and individuals recover from financial crisis and move forward. From credit counselling and money coaching to retirement planning and community financial literacy, we are creating a healthier financial future for the entire province.

SOURCE Money Mentors

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