The Provincial Budget announced on April 14th included the reinstatement of a tax on insurance. The 15% Retail Sales Tax (RST) on insurance premiums will apply only to property and casualty (P&C) insurance policies issued or renewed on or after July 1, 2016.
Here’s a summary of the RST:
- The 15% RST will apply to all contracts of property and casualty insurance with effective or renewal dates of July 1, 2016 or later;
- Policies of insurance covering accident and sickness, life, certain marine, and surety, guarantee or fidelity type bonds are exempt from the RST;
- The RST will be remitted on a basis that coincides with the timing of premium instalments;
- Where a person purchases insurance from an out-of-province seller not registered to collect the tax that person must self-assess and remit the tax directly to the Department of Finance;
- The RST will apply to all dues, assessments and transaction fees associated with an insurance policy, with the exception of Non Sufficient Funds (NSF) fees and any interest, finance charges, service charges, and underwriting fees that are broken out separately on the invoice;
- Endorsements, or changes, to insurance policies in existence/with effective dates prior to July 1, 2016 will be exempt from the RST; and,
- There will be limited retroactivity to April 14, 2016 applied to premature policy cancellations, and government may audit these cancellations to determine if the intent was tax avoidance. Insurers and agents may be required to submit information to Department of Finance about policies cancelled and/or issued/renewed in the April 14, 2016 to June 30, 2016 period for the purpose of assessment.
For more information on the RST, you can download Government’s FAQ here.