Ontario Insurance Premium Tax

Definition

Ontario insurance premium tax is a tax on gross premiums written by insurers for contracts covering persons resident in Ontario or property situated in Ontario. The primary regime is the Insurance Premiums Tax under Part IV of the Taxation Act, 2007, paid by the insurer on its gross premium income. Insurers typically pass this tax on to policyholders as part of the premium. A secondary regime, a residual 8% Retail Sales Tax (RST) under the Retail Sales Tax Act, continues to apply to certain contracts of insurance including group benefit plans, even though Ontario otherwise moved to HST in 2010.

Key rules

• The basic Insurance Premiums Tax rates under the Taxation Act, 2007 are:
  • 2% on property insurance, liability insurance, and most other general insurance contracts
  • 3% on accident and sickness insurance, and life insurance
  • 3.5% on automobile insurance
  • (Confirm rates for 2026: Ontario publishes annual IPT rate schedules)
• The tax is imposed on the insurer, not directly on the policyholder. Insurers file quarterly Insurance Premiums Tax returns with the Ministry of Finance.
• A separate 8% Ontario RST applies to contracts of insurance that are not otherwise subject to HST: group life, group health, dental, and certain other benefit plans. The RST is paid by the employer or the person purchasing the contract.
• Neither the IPT nor the 8% RST is recoverable as an input tax credit. The cost flows through to the insured as part of the premium or is capitalized into the insurance expense.
• Self-insurance arrangements and certain reciprocals have special rules; captive insurers and surplus lines may owe tax under separate provisions.

Example

A Toronto small corporation buys a commercial general liability policy with a $5,000 annual premium and an auto fleet policy with a $4,000 annual premium in 2026. The liability policy premium includes approximately $100 of IPT (2%). The auto policy includes approximately $140 of IPT (3.5%). Separately, the corporation purchases a group benefit plan for its employees at $12,000 per year; on this plan it owes 8% RST ($960), which the insurer typically invoices as a separate line item or which the employer self-assesses if not charged.

Common mistakes

• Forgetting the 8% RST on group benefit plans. The HST regime did not fully absorb insurance; group benefit RST remains a live obligation for most Ontario employers.
• Assuming insurance premiums attract HST. Most insurance contracts are exempt under ETA Schedule V; IPT (and the residual RST) applies instead.
• Treating IPT as a separately recoverable tax. IPT is the insurer's tax. The insured cannot claim ITCs or refunds on it.
• Missing the self-assessment obligation when buying group benefits from an out-of-province or unlicensed insurer.

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