Harmonized Sales Tax -
Tax Tip
4
Published: April 2010
Content last reviewed: August 2010
ISBN:
978-1-4435-2484-1 (Print), 978-1-4435-2486-5 (PDF), 978-1-4435-2485-8 (HTML)
Notice to the reader: On July 1, 2010 the 13 per cent Harmonized Sales Tax (HST) took effect in Ontario and is administered by the Canada Revenue Agency (CRA). For up-to-date information about the HST, visit the CRA website or call 1 800 959-5525.
This publication was archived and kept for historical purposes. Use caution when you refer to it, since it reflects the law in force at the time it was released and may no longer apply.
This information will help you understand how Retail Sales Tax applies to insurance premiums after June 30, 2010.
Ontario Retail Sales Tax (RST) currently applies at a rate of 8 per cent to premiums for certain types of insurance, including group insurance, contributions paid into funded plans or on benefits paid out of unfunded plans as well as payments made into insurance schemes or compensation funds established under an Act of Canada or Ontario.
In the 2009 Ontario Budget, the government announced a comprehensive tax package that includes moving to an HST at a rate of 13 per cent effective July 1, 2010. Generally, insurance premiums are currently exempt from the federal Goods and Services Tax (GST) as financial services and the treatment under HST will be the same as under GST.
Ontario will continue its application of tax at a rate of 8 per cent on the same types of insurance premiums currently taxed under RST. Insurance that is currently exempt from RST, such as automobile insurance premiums, will continue to be exempt from RST after June 30, 2010. Certain costs and fees, such as administration fees for benefit plans, will be exempt from RST as they are taxed under HST.
Effective June 30, 2010, all RST vendor accounts were closed and businesses primarily engaged in insurance activities (identified brokers) were automatically re-registered with the Ministry of Finance and given a vendor permit to collect and remit RST.
Tax return filing frequencies that were in place for RST returns are maintained after June 30, 2010. All other businesses that collected RST on insurance premiums prior to July 1, 2010, but are not primarily engaged in insurance activities must contact the Ministry of Finance to register and continue collecting and remitting RST.
Businesses that are required to register include:
If you are required to re-register or are unsure if you are required to be registered to charge and collect RST on taxable insurance premiums, you may contact the Ministry of Finance by:
Under the RST Act, vendor compensation is payable for the 12 month period beginning April 1 of each year. Vendors collecting RST on insurance premiums are eligible for the general RST vendor compensation from April 1, 2010 to June 30, 2010. In the 2010 Ontario Budget, the government provided a special transition period from July 1, 2010 to March 31, 2011 to ensure the annual maximum vendor compensation of $1,500 is maintained for that transition year. Vendors that collect RST on insurance premiums may claim compensation as follows:
Information on how RST applies to insurance premiums can be found by accessing RST Guide 519 - Insurance - General Information on the Ministry of Finance's website.
The Canada Revenue Agency administers the HST. Visit their website at www.cra.gc.ca/gsthst or call 1 800 959-5525 for more information.
