Taxability of Insurance Premiums Based on Place of Employment or Residency
Information and Disclaimer
This interpretation letter was issued based on the specific circumstances or situation of a taxpayer or vendor and the law and tax policy in effect at the time the ruling was issued. Specific facts relevant to your situation may change the application of the tax. In accordance with the Freedom of Information and Protection of Privacy Act, all confidential and identifying information has been removed from this interpretation letter. Please be aware that any statute or policy referred to in this letter may have been superseded. Where a letter contains links to a retail sales tax publication, the link is to our current publication on that subject, regardless of the date that the ruling was originally issued, and the current publication may not be reflective of the information originally provided. In no event shall the Government of Ontario be liable for any damages whatsoever arising out of, or in connection with, the use of the information contained herein.
Interpretation Letter IN-0007, April 2001
Thank you for your January 5, 2001, facsimile regarding the application of Ontario retail sales tax (RST) to insurance premiums.
Understanding of Facts
Company A is enquiring as to whether RST on insurance premiums are dependant upon place of employment or residency.
Legislation and/or Administrative Policy
Under the Ontario Retail Sales Tax Act,
2.1(1) Every person who is a resident of Ontario, or who carries on business in Ontario, and who,
- enters into a contract of insurance with an insurer;
- is a person whose risk is covered by group insurance;
- is a planholder or member of a benefits plan; or
- is required to contribute to an insurance scheme or a compensation fund established by or under any Act of the Parliament of Canada or the Legislature of Ontario,
shall pay to Her Majesty in right of Ontario a tax at the rate of 8 per cent of the premium payable.
Premiums for Group Insurance
An employer, who carries on business in Ontario, is required to pay RST on the employer's group insurance premiums relating to employees who ordinarily work at or are paid through an Ontario location, less the premiums paid by the employees.
An employee who is both resident in Ontario and works at or is paid through an Ontario location is required to pay tax on the premiums he/she pays for group insurance.
The following chart outlines the application of RST to group insurance premiums:
| Where The Employee Lives | Where the Employee Works | Employer Premiums | Employee Premiums |
|---|---|---|---|
| Ontario | Ontario | Taxable | Taxable |
| Outside Ontario | Ontario | Taxable | Exempt |
| Ontario | Outside Ontario | Exempt | Exempt |
Analysis & Conclusion
Group Insurance Premiums
Employer premiums under group insurance are taxable dependant upon place of employment and not residency. If an employee works in Ontario, or whose salary is paid in Ontario, then employer premiums are taxable.
Employee premiums under group insurance are taxable dependent upon both place of employment and residency. An employee must live in Ontario and work in Ontario in order for employee premiums to be taxable.
Benefits Plan
Employer premiums are taxable for employees who work in Ontario or are paid through a location in Ontario.
Employee premiums are taxable for employees who reside in Ontario.
We are enclosing Ontario Retail Sales Tax Guide #519 - Insurance for your information.
If you have any further questions, please contact our office.
ISBN 0-7794-2507-3
© Queen's Printer for Ontario, 2002
