Court case answers tax question for brokers

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In a recent ruling, some clarity was provided for brokers about whether or not taxes are required on mortgage broker fees or commissions.

In a recent ruling for the case of Rojas v. Her Majesty the Queen, 2016 TCC 177, the Tax Court of Canada said they do not.

“The main takeaway for mortgage brokers is that GST does not apply to fees or commissions, at least in the circumstances described,” the Canadian Mortgage Brokers Association (CMBA) said in its analysis of a recent case.

The business deal at the centre of the case was a typical mortgage broker arrangement, according to CMBA.

A licensed broker “ identified a potential borrower and determined whether the borrower qualified for a mortgage. She identified lenders who were willing to provide a mortgage loan to the borrower and the various terms under which the mortgage loan would be provided,” CMBA said. “Once the borrower chose a lender and a specific mortgage, the broker took steps to obtain a lending commitment from the lender.”

The deal was submitted to a lender and the broker earned a commission.

“The Court applied to these fairly typical facts, fairly straightforward law. Taxable supplies are supplies made in the course of commercial activities. They attract GST, unless an exemption applies. The broker’s activities were a business,” CMBA wrote. “She provided services in the business in the course of commercial activity. The services attracted GST, unless the services came within an exemption.”

However, the court ruled there was an exemption because the services rendered were financial.

“The Court rejected Her Majesty’s argument that the broker did not provide exempt services but rather was providing administrative services that were preparatory for the brokerage to provide or potentially provide the services,” CMBA wrote.

To read the entire ruling, click here.
 
  • Jason Nugent on 2016-08-24 9:59:12 AM

    Here is a perfect example why every broker/agent should be part of our provincial and National associations. With everyone's support we could actually go directly to the policy makers and help them to better understand our business and not have to waste everyone's time in court?

  • Chad Robinson on 2016-08-24 4:17:48 PM

    Jason I couldn't agree with you more! Everyone broker and agent should support all associations. Next time you complain about the fee ask your self what it would be like if you lost 13% of your income.

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