- What is the RST rate imposed on premiums for insurance?
- What insurance contract premiums will be subject to RST?
- Who should register and remit the RST?
- How do I register for an insurance premium tax account?
- What fees and charges, which are invoiced to a customer in connection with a taxable insurance contract, are subject to tax?
- Will the tax apply to First Nations? What evidence will the Government consider sufficient supporting documentation for the industry to not charge the tax?
- How will the Government tax policies across multiple jurisdictions?
- Will there be a requirement for the RST to be disclosed separately on the insurance contract and invoice?
- How do I file the required returns and remit the RST?
- Does the RST paid by companies registered for the HST qualify as an input tax credit on their HST return?
- How does the RST apply to travel insurance premiums?
1. What is the RST rate imposed on premiums for insurance?
A tax rate of 15% will be applied to the taxable premiums for contracts of insurance relating to property, risk, peril or events in the province.
2. What insurance contract premiums will be subject to RST?
The tax will apply to contracts of insurance relating to property, risk, peril, or events in the province.
The following types of insurance premiums will be exempted from the RST, as they are defined in the
Insurance Companies Act:
- Accident and sickness insurance
- Life insurance
- Automobile insurance
- Marine insurance (other than marine insurance on sport watercraft, when sport watercraft are 20 tons gross or less)
- Surety, guarantee or fidelity type insurance
- Residential mortgage default insurance
- Crop insurance provided under the Crop Insurance Act and
- Livestock insurance provided under the Livestock Insurance Act
Personal property insurance was temporarily excluded from the tax from April 7, 2022 to April 6, 2023. Budget 2023 announced that effective April 7, 2023, the elimination of the tax on personal property insurance is now permanent.
3. Who should register and remit the RST?
An insurer or insurer’s agent is required to register, collect, and remit tax on contracts of insurance relating to property, risk, peril or events in the province. The obligation to collect and remit the RST will rest with the party that bills and collects the premiums, whether the insurer or the insurer’s agent.
Where a person purchases a contract of insurance from an out of province seller not registered to collect the tax , then that person must self-assess and remit the appropriate amount of tax directly to the Department.
4. How do I register for an insurance premium tax account?
A registration form for insurance premiums tax must be completed and filed with the Department of Finance. This form is available on the Government’s website here. Completed registration applications can be filed by mail, fax, or email to
taxadmin@gov.nl.ca.
There is an option to file returns and make account payments through the online Newfoundland and Labrador Electronic Tax Service. This will require the completion and filing of the following two forms, along with your registration: the Application to e-File Returns and Payments and the Pre-Authorized Debit Agreement. These forms are both available on Government’s website.
Following the processing of registration, you will be issued a RST collector license and a tax remitter number. If availing of the e-file option, the necessary information (ID and PIN numbers) to access your e-file account will be forwarded separately.
Specific inquiries related to registration and e-file set up and access should be forwarded to the Registrar at 709-729-1786 or
taxadmin@gov.nl.ca.
5. What fees and charges, which are invoiced to a customer in connection with a taxable insurance contract, are subject to tax?
All dues, assessments, transaction fees, processing fees, policy fees, and other consideration charged by the insurer or the insurer’s agent are taxable, except as noted below.
If the fees or charges apply to both taxable and exempt insurance contracts, they are subject to tax in proportion to the taxable insurance component.
Interest, finance charges, and underwriting fees that are clearly broken out separately on the invoice are not taxable. In addition, any portion of a premium that is subject to HST is not taxable.
Non-Sufficient Fund (NSF) charges are not taxable.
6. Will the tax apply to First Nations? What evidence will the Government consider sufficient supporting documentation for the industry to not charge the tax?
Insurance contracts purchased by Status Indians or Indian Bands covering their property situated on a reserve or for risks, perils or events that relate wholly to a reserve are not taxable, including residential homes or autos. Insurance providers are responsible for obtaining the Indian Status Identification Number issued by Indigenous Services Canada. The exemption from provincial taxes on a reserve under the federal Indian Act does not extend to corporations owned by Status Indians or Indian Bands. Therefore, insurance contracts purchased by corporations owned by Status Indians or Indian Bands covering property situated on a reserve or for risks, perils or events that relate to a reserve are taxable.
7. How will the Government tax policies across multiple jurisdictions?
Insurance contracts may relate to risks, perils and events that may occur both inside and outside of Newfoundland and Labrador. Tax should only be calculated on the portion of the payment relating to property, risk, peril, or events in the province in accordance with the formula below. The allocation to be used in the formula is to be determined on the basis that is most reasonable to the circumstances such as:
- the insured value of property in the province as a percentage of the total value of the property insured in all jurisdictions; and
- for contracts covering employees both inside and outside the province, the portion that covers province based employees.
Taxable Portion of Insurance Contract = P/I x C
where:
P = total monetary value of property, risk, peril or events covered by the contract of insurance which are in or relate to the province;
I = total monetary value of property, risk, peril or events covered by the contract of insurance;
and
C = consideration paid for the entire contract of insurance.
8. Will there be a requirement for the RST to be disclosed separately on the insurance contract and invoice?
Yes, the RST on insurance premiums must be shown as a separate item on any receipt, bill, invoice, or other document issued by the insurer or insurer’s agent.
9. How do I file the required returns and remit the RST?
Following registration, registrants will receive a personalized tax return for the purpose of reporting and remitting insurance premiums tax collected. Filing instructions will be included on the return and there will be an option to file returns and make account payments online through the Newfoundland and Labrador Electronic Tax Service. The return, along with the payment of tax due, must be received by the Department of Finance within 20 days following the reporting period.
10. Does the RST paid by companies registered for the Harmonized Sales Tax (HST) qualify as an input tax credit on their HST return?
No, the 15% RST charged is not the HST. Consequently, it is not eligible as an input tax credit on the HST return.
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11. How does the RST apply to travel insurance premiums?
Travel insurance is not defined under the legislation and may include accident and sickness (exempt) components, as well as property insurance within the province (taxable) and outside the province (non-taxable). The following guidelines apply to travel insurance:
Exempt
- Accident and sickness insurance as defined in the Insurance Companies Act.
Taxable
- Baggage loss, personal effects, and delay benefits for travel within the province.
- Trip cancellation insurance for travel originating within the province.
- Trip interruption insurance for travel within the province.
Non-Taxable
- Baggage loss, personal effects, and delay benefits for travel outside the province.
- Trip cancellation insurance for travel originating outside the province.
- Trip interruption insurance for travel outside the province.
The premium has to be broken down between the exempt, taxable and non-taxable components and the tax rate applied to the taxable premium. If the different components are bundled and not broken down, the whole amount is taxable.
For more information regarding the Retail Sales Tax on Insurance Premiums, please contact:
Tax Administration Division
Department of Finance
P.O. Box 8700
3rd Floor, East Block
Confederation Building
St. John’s, NL A1B 4J6
Tel: (709) 729-6297
Fax: (709) 729-2856
Toll Free: 1-877-729-6376
Email: taxadmin@gov.nl.ca