Ontario Insurance Premium Tax

Definition

Ontario has two distinct insurance taxes. Corporations Tax - Insurance Premium Tax (CT-IP) is governed by the Corporations Tax Act and generally paid by insurers on taxable premiums. Benefit-plan administrators and some purchasers using unlicensed insurers also have obligations. Separately, the purchaser pays Retail Sales Tax (RST) on taxable premiums and benefit arrangements. Insurance being exempt from GST/HST does not make it exempt from these provincial taxes.

Key rules

• Ontario's CT-IP rates are 2% for life, accident and sickness, 3.5% for property, and 3% for other insurance. Classify the coverage; there is no blanket 3.5% automobile rate.
• CT-IP returns are annual, due six months after year-end. Instalments may be quarterly or monthly, depending on the rules. An instalment is not a quarterly return.
• RST is 8% on taxable insurance premiums, including many property, liability, and group-benefit arrangements. Exemptions include qualifying compulsory automobile insurance and individual life/health coverage. Group coverage and employee location require separate checks.
• Neither CT-IP nor RST is GST/HST, so neither creates a GST/HST input tax credit. Record invoiced insurance costs, including non-recoverable tax, in the appropriate expense or prepaid-insurance account; do not add an assumed insurer tax a second time.
• Funded and unfunded benefit plans have different taxable bases. Ontario introduced an election effective April 1, 2026 for funded plans to be treated as unfunded for CT-IP. Use the current provincial instructions before applying that election.

Example

A Toronto corporation's property policy invoice shows a taxable premium of $5,000 and 8% RST of $400. Its annual insurance cost is $5,400, allocated over the coverage period. The $400 is not an input tax credit. The insurer separately accounts for CT-IP at the property rate on its applicable premium base; the purchaser does not add another 3.5% to the invoice. A separate fully taxable group-benefit premium of $12,000 before RST attracts $960 of RST.

Common mistakes

• Swapping CT-IP categories or treating the insurer's tax as an extra purchaser invoice line.
• Assuming every premium is subject to RST, or that RST applies only to employee benefit plans.
• Claiming provincial insurance taxes as GST/HST input tax credits.
• Confusing annual returns with instalments or overlooking self-assessment duties.

Related concepts

• Ontario HST
• Insurance Expense
• Taxable, Zero-Rated, and Exempt Supplies