The Ontario insurance premium tax is a provincial tax on gross premiums that insurers (and, in some cases, policyholders) owe on coverage written for Ontario risks. The rate depends on the type of insurance: 2% on life, accident, and sickness premiums; 3.5% on property; and 3% on everything else, including auto and most commercial liability lines.1Government of Ontario. Corporations Tax: Insurance Premium Tax The tax is authorized under the Corporations Tax Act, R.S.O. 1990, c. C.40, and applies to gross premiums and deposits receivable in the taxation year from Ontario policyholders.2Ontario.ca. Corporations Tax Act, R.S.O. 1990, c. C.40
Rates by Type of Insurance
Three rates cover the field:
- Life, accident, and sickness insurance: 2%
- Property insurance: 3.5%
- All other insurance (including vehicle and general liability): 3%
Reciprocal and inter-insurance exchanges pay 3% on gross premiums or deposits receivable for business transacted in Ontario.2Ontario.ca. Corporations Tax Act, R.S.O. 1990, c. C.40 The gap between the 3.5% property rate and the 3% “all other” rate is small but real, and mixing the two categories on a return is one of the more common errors filers make.
What the Tax Applies To
The base is gross premiums and deposits receivable in the taxation year from Ontario policyholders.2Ontario.ca. Corporations Tax Act, R.S.O. 1990, c. C.40 The return breaks premiums out by category so that the correct rate applies to each pool. Cancellations and refunds issued during the year reduce the gross figure, so tracking them through the year is what lets you justify the taxable total if the Ministry of Finance asks.
Exemptions
Section 74(7) of the Corporations Tax Act carves out several categories from the premium tax:
- Marine insurance premiums are fully exempt.
- Premiums payable on the premium note plan to mutual insurance corporations that insure agricultural and other non-hazardous risks, where the corporation carries on its sole business in Ontario.
- Mutual insurance corporations insuring agricultural and non-hazardous risks that are parties to the Fire Mutuals Guarantee Fund agreement under the Insurance Act.
- Fraternal society contracts entered into before January 1, 1974. Contracts written on or after that date are taxable.
- Mutual benefit societies, pension funds, employees’ mutual benefit societies, and non-profit medical insurance associations.
Exemptions are claimed on the return itself, and the filer must cite the statutory provision supporting each one.1Government of Ontario. Corporations Tax: Insurance Premium Tax
Retail Sales Tax Is Separate
The premium tax is not the only Ontario tax on insurance. A separate 8% retail sales tax applies to premiums under many insurance contracts, including property insurance covering property in Ontario, group life insurance, and contributions to funded benefit plans that provide drug, dental, or vision care to employees. Contributions by subscribers of reciprocal insurance exchanges are also caught.3Government of Ontario. Insurance and Benefits Plans – Retail Sales Tax
The RST base is broader than the premium alone. It includes dues, assessments, and administration fees such as claims management and brokerage charges, though fees already subject to HST are excluded.3Government of Ontario. Insurance and Benefits Plans – Retail Sales Tax For commercial property coverage, the 3.5% premium tax and the 8% RST stack to 11.5% before the premium itself.
Coverage Placed With Unlicensed Insurers
If you buy coverage from an insurer that is not licensed in Ontario, you are the one on the hook for collecting and remitting the premium tax, at the same rates a licensed insurer would pay.1Government of Ontario. Corporations Tax: Insurance Premium Tax
A separate federal levy of 10% also applies to net premiums paid under contracts with insurers not authorized to do business in Canada or any province, and it sits on top of the Ontario tax.4Canada Revenue Agency. X7-1 Special Levies – Insurance Premiums Businesses that place coverage with foreign markets sometimes miss this until an audit catches it.
Installments, Balance, and How To File
Monthly installments are required when the premium tax for both the current year and the prior year is $10,000 or more. Insurers can calculate installments three ways: one-twelfth of the current year’s estimated tax, one-twelfth of the prior year’s actual tax, or a smoothing method built on the tax from two years ago that adjusts across the remaining ten months. Whichever method you pick, stick with it through the year.1Government of Ontario. Corporations Tax: Insurance Premium Tax
The balance owing after installments is due within two months after the end of the taxation year. Canadian-controlled private corporations with prior-year taxable income of $500,000 or less get an extra month, so their balance is due within three months of year-end.1Government of Ontario. Corporations Tax: Insurance Premium Tax Returns can be filed through the ONT-TAXS online portal, the Ministry of Finance’s primary channel for Ontario business tax accounts.
Interest If You Pay Late
Overdue premium tax accrues interest at a rate the Ministry of Finance resets every three months, compounded daily.5Government of Ontario. Tax Interest Rates Because compounding is daily and the rate moves quarter to quarter, check the current rate before sending a late payment rather than working from an older figure.