Canada, Newfoundland and Labrador reintroduce retail sales tax on insurance premiums

Changes in taxes on insurance premiums have been announced in the 2016 Newfoundland and Labrador Budget.

The 2016 Newfoundland and Labrador Budget - published by the Ministry of Finance at the House of Assembly last month - contains some changes in taxes on insurance premiums.

On the one hand the Retail Sales Tax of 15% is being re-introduced; on the other hand, the Insurance Companies Tax will increase by 1%, all taking effect from 1 July 2016.

What is a retail sales tax?

Retail Sales Tax (RST) in Newfoundland and Labrador (NL) is a type of provincial sales tax which is levied by provinces in Canada and varies across industries and provinces. RST was firstly introduced on insurance premiums back in February 2000. It was then abolished from 1 January 2008 and all policies incepting on or after that date ceased to be liable for the tax.

What insurance policies are subject to the tax?

The reintroduced RST of 15% will be applied to insurance premiums for property and casualty insurance policies; mainly vehicles, homes and businesses). The following policies are exempt from the tax:

  • Accident insurance
  • Sickness insurance
  • Life insurance
  • Marine insurance, other than marine insurance on sport watercraft, when the sport watercrafts are 20 tonnes gross or less
  • Surety, guarantee or fidelity type bonds

Where the risks covered are both within and outside of the Province, the tax should be calculated only upon the portion of the payment relating to the risks within the province.

Solutions in IPT Quote

IPT Quote, TMF Group’s online tax calculation tool, will be updated with the 15% retail sales tax. The tax will be shown payable by the insured and administered by the insurer.

IPT Quote users should note that an insurer or insurer’s agent who maintains an office or local representative within the province is required to register with the Department of Finance Taxation and Fiscal Policy Branch for the purposes of collecting the tax; where a person purchases a contract of insurance from an out of province seller not registered to collect the tax, that person must self-assess and remit the appropriate amount of tax directly to the Department.

Those using IPT Quote for a global program should note that a 10% Excise Tax will be due if the business is not retained by an approved local broker. Apart from the Retail Sales Tax, Excise Tax, the Insurance Companies Tax will also see a rise from 4% to 5%.

Need more information? Contact our IPT experts.

Get in touch with our experts at TMF Canada here.

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