Corporations Tax: Insurance Premium Tax

Who pays Corporations Tax - Insurance Premium Tax (CT-IP)

In general, insurance companies operating a business through a permanent establishment in Ontario pay Corporations Tax - Insurance Premium Tax (CT-IP) on all premiums.

Learn more about the rules in section 74 of the Corporations Tax Act

Along with insurance companies, CT-IP is also collected and paid to the province by:

• administrators of funded and unfunded benefit plans
• insurance brokers placing insurance contracts with unlicensed insurers
• persons contracting with unlicensed insurers
• reciprocal or inter-insurance exchanges

Insurance premium tax rates

Benefit plans

A benefit plan (also referred to as an Uninsured Benefit Arrangement) provides protection against risks to individuals that could otherwise be covered by taking out a contract of insurance. Benefits may be partly insured or not insured at all.

Benefit plans may include coverage for:

• death or disability
• supplemental health care (such as drugs, dental, vision or hearing care)
• loss of income due to illness or accident
• other similar benefits

Funded and unfunded benefit plans

A benefit plan may be funded or unfunded.

A benefit plan is a funded benefit plan if the contributions paid into it are in excess of the amounts required for the payment of benefits foreseeable and payable within 30 days.

Any other benefit plan is an unfunded benefit plan.

How CT-IP applies

CT-IP is charged differently depending on the type of benefit plan:

• For funded benefit plans, CT-IP is charged on the taxable contributions paid into the plan by the planholder and the members.
• For unfunded benefit plans, CT-IP is charged on the taxable benefits paid out of the plan.

CT-IP also applies to any payments made for administration fees, regardless of the type of plan.

Qualifying trust

A benefit plan may also be in the form of a qualifying trust.

A qualifying trust means a trust that is established on or after December 1, 2010 that qualifies as an employee life and health trust under subsection 144.1(2) of the Income Tax Act (Canada) at any point in the taxation year.

If a qualifying trust contains contributions that exceed three years worth of benefit payable to its members, or a different period set by regulation, the qualifying trust may elect to be treated as an unfunded benefit plan where it would otherwise be a funded benefit plan. If the qualifying trust is making this election, check the “Election filed under 74.2 (3.1) of the CTA” box on the CT-IP return.

Planholder

A planholder is the person who provides a benefit plan or arranges for the plan to be provided or, in relation to a qualifying trust, each trustee of the qualifying trust.

In most cases, the planholders are the employers who are seeking to provide the benefits as part of their employee compensation packages.

Member

The member is an individual to whom or for the benefit of whom benefits are payable under a benefit plan.

In most cases, members are typically employees.

Administrators of benefit plans

Planholders and members are responsible for paying the CT-IP. However, an Ontario administrator is required to collect and remit CT-IP. An Ontario administrator includes unincorporated administrators.

Administrators may include:

• persons who receive contributions or make payments of benefits
• persons to whom fees are paid for administering plans
• third-party administrators
• trustees if the benefit plan is a trust
• partners of a partnership that administers the plan
• the planholder of the plan, if the person who receives the contribution or pays the benefits does not have a permanent establishment in Ontario

An Ontario administrator is required to register with the ministry for a CT-IP account. The CT-IP collected by the administrator is considered a debt owed to the Crown. It must be reported and remitted in the same way as other taxes payable under the Corporations Tax Act.

Out of province administrators

If an Ontario planholder (such as a corporation or employer) engages an out of province administrator who does not charge or collect Ontario CT-IP, the Ontario planholder becomes the Ontario administrator and is responsible for collecting and remitting CT-IP to the ministry.

The Ontario planholder must:

• self-assess the CT-IP owing
• remit the CT-IP to the ministry

Alternatively, the Ontario planholder may also require their out of province administrator to voluntarily register with the ministry and collect and remit the tax on their behalf.

Exemptions

Benefit plans do not include:

• a plan or fund established by or under an Act of the Parliament of Canada or the Ontario Legislature
• a contract referred to in section 4 of the Prepaid Hospital and Medical Services Act between an association registered under that Act and its subscribers or members

Amounts under benefit plans that are exempt:

• benefits for a member of the plan who is an Indian within the meaning of the Indian Act (Canada), who is ordinarily resident on a reserve in Canada
• benefits for a member of the plan who does not live in Ontario
• benefits for a member of the plan that must be included as income from an office or employment under the Income Tax Act (Canada)

Examples of CT-IP calculations

Example 1: Funded benefit plans

Employer A is based in Ontario and has established a funded benefit plan to offer employee health benefits. Employer A has hired Administrator B, a company with a permanent establishment in Ontario, to administer the plan.

Under the agreement between Employer A and Administrator B, Employer A pays:

• a taxable contribution of $1,000 to the plan on the first day of each month
• an administration fee equal to 10% of the taxable contribution

Administrator B is responsible for reviewing and processing employee claims as well as preparing a monthly plan report to Employer A.

CT-IP calculation:

• Taxable contributions: $1,000
• Administration fee: $100 ($1,000 x 10%)
• CT-IP amount: $22 (($1,000+$100) x 2%)

Administrator B should collect $22 CT-IP from Employer A when the taxable contributions and administration fees are paid into the plan and remit it to the ministry.

CT-IP is not charged when benefits are paid to employees.

Example 2: Unfunded benefit plan

Employer A is an Ontario based company who has hired Administrator B, a company with a permanent establishment in Ontario, to manage its employee benefit plan. Under this arrangement, no funds are pre-deposited into the plan. The administration fee is 10% of the benefits paid amount.

Employees of Employer A incurred $1,000 medical expenses, which are 100% covered by the plan:

1. Employees submit the expenses along with claim forms to Employer A.
2. Employer A forwards the claims to Administrator B.
3. Administrator B reviews the claim, determines the reimbursement amount and sends an invoice to Employer A.
4. Employer A pays the invoice to Administrator B.
5. Administrator B pays the employees.

CT-IP calculation:

• Taxable benefit: $1,000
• Administration fee: $100 ($1,000x10%)
• CT-IP amount: $22 (($1,000+$100)x2%)
• Total: $1,122

Administrator B invoices Employer A a total of $1,122 which includes:

• $1,000 taxable benefit
• $100 administration fee
• $22 CT-IP (to be remitted to the ministry by the Administrator)

Note: This example does not include other taxes such as Retail Sales Tax and Harmonized Sales Tax.

Examples of administrator registration

Example 1: Self administration

Corporation A offers a Health Spending Account that covers:

• dental
• drugs
• vision benefits

This is an unfunded, pay-as-you-go plan. Corporation A chooses to self-administer the plan and does not hire a third-party administrator.

As the planholder and administrator, Corporation A is required to register with the ministry for a CT-IP account.

Example 2: Shared administration

Corporation A is an Ontario-based company. It has established an Employee Life and Health Trust (ELHT), with all trustees based in Ontario. The ELHT provides the following benefits:

• supplemental health
• dental
• short-term disability benefits

The ELHT has contracted an Ontario Insurer B to administer the supplemental health and dental benefits. The trust decides to self-administer the short-term disability benefit.

For CT-IP purposes:

• insurer B and the trustees of the ELHT are considered administrators
• both are required to register with the ministry for a CT-IP account
• an election may be filed to have only one Ontario administrator to report and remit the CT-IP. The administrator who files the return must certify that all tax payable is accounted for in their return. Other Ontario administrators may still be held liable for any tax that has not been accounted for.

Insurance contracts with unlicensed insurers

An unlicensed insurer is an insurer that is not licensed under the Insurance Act to carry on an insurance business in Ontario.

CT-IP is payable by an Ontario corporation that enters into or pays premiums under an insurance contract with an unlicensed insurer.

CT-IP is also payable by an Ontario individual who, through an Ontario insurance broker, enters into or pays premiums under an insurance contract with an unlicensed insurer.

The insurance contract is in respect of property situated in Ontario or a person who is resident in Ontario, but does not include life insurance.

Who pays the CT-IP

• if you buy insurance directly from an unlicensed insurer, you must remit the CT-IP to the ministry
• if you use an Ontario licenced insurance broker, the broker should:
  • register with the ministry
  • charge, collect, and remit the CT-IP on your behalf

Reciprocal or inter-insurance exchanges

CT-IP applies to reciprocal or inter-insurance exchanges. These are a group of subscribers exchanging reciprocal contracts of indemnity or insurance with each other through the same attorney.

Subscribers are typically organizations that self-insure their members, such as:

• hospitals
• school boards
• municipalities
• law firms

Insurance exchanges are not required to make instalment payments, but must pay the tax by the balance due date.

Register for a CT-IP account

Who needs to register

Persons that are required to register for an CT-IP account include:

• insurance companies carrying on business through a permanent establishment in Ontario
• Ontario administrators of a benefit plan such as third party administrators, trustees, planholders
• insurance brokers placing insurance contracts with unlicensed insurers
• Ontario corporations contracting with unlicensed insurers, for example an Ontario company purchases insurance policy through an out-of-Ontario parent company who places the contract with an insurer that is not licensed in Ontario
• reciprocal or inter-insurance exchanges within the meaning of the Insurance Act
• other entities liable to calculate, collect and remit the CT-IP

Before you register

You need an Ontario Corporation Number before you can register for a CT-IP account.

• get an Ontario corporation number
• once you have your corporation number, you can request a CT-IP account from the Ministry of Finance
• download and complete the registration form

If you have any questions, please call the ministry at 1-866-668-8297.

File your return and make payments

The fastest and most convenient way to file your CT-IP return and make payments is online.

Use ONT-TAXS online to:

• file your CT-IP return
• make secure payments
• access your account anytime

ONT-TAXS online is available 24/7 and provides instant confirmation of your submission.

If you cannot file online, you can:

• visit selected ServiceOntario locations
• mail your return and payment to:

Ministry of Finance
33 King Street West, PO Box 620
Oshawa ON L1H 8E9

You can also make payments in person at your Ontario financial institution. Payments should be in Canadian funds and made payable to the Minister of Finance. Your business identification number should be printed on the back of the cheque or money order.

The Ministry of Finance will mail you a personalized tax return during the last month of your tax year. To go paperless, login to ONT-TAXS online to update your mail preferences.

Read on: Corporations Tax – Insurance Premium Tax Return Guide

Due dates

A completed tax return and any supporting documents must be filed within six months after the end of your tax year. If the return is filed late, a penalty may be imposed.

Application of payments

Payments and credits are first applied against any tax owing, second against any penalty owing, third against any interest owing, and fourth against any other amounts owing.

Assessment

An assessment will be mailed to you after your tax return is processed. If you have an outstanding balance on your account, you will receive a monthly statement. If you are entitled to a refund, it will be paid after your assessment is issued.

Estimated amount owing

If you do not file your tax return on time you may receive an assessment that has automatically estimated an amount of CT-IP owing.

Instalments and balance due

Instalments are not required to be made by an insurance exchange, or under the following circumstances:

• the current taxation year is the first year filing
• the CT-IP for either the current taxation year or the previous taxation year is less than $2,000

Quarterly instalments

Instalments may be paid quarterly (every three months) if the CT-IP for the current taxation year or the previous taxation year is equal to or greater than $2,000 and less than $10,000. Quarterly instalments should be calculated according to one of the following three methods:

1. 1/4 of the CT-IP for the current taxation year
2. 1/4 of the CT-IP in the previous taxation year
3. for the first quarter of the taxation year, 1/4 of the CT-IP from two years ago; and for the next three quarters, 1/3 of the difference between the previous taxation year's CT-IP and the instalment paid for the first quarter

Monthly instalments

Instalments must be paid monthly if the CT-IP for both the current taxation year and the previous taxation year are each $10,000 or more. Monthly instalments should be calculated according to one of the following three methods:

1. 1/12 of the CT-IP for the current taxation year
2. 1/12 of the CT-IP in the previous taxation year
3. for the first two months, 1/12 of the CT-IP from two years ago; and for the next 10 months, 1/10 of the difference between the previous taxation year's CT-IP and the amount paid for the first two months

The use of the first method requires estimating the CT-IP in the current taxation year. Where the instalments made are less than the actual tax payable, interest may be assessed on any deficiency in the instalment account.

When calculating instalments for a previous year that has less than 365 days, the CT-IP for that previous year must be grossed up to 365 days. Furthermore, if a previous year has less than 183 days, the CT-IP for that previous year is the greater of the:

• CT-IP for that previous year grossed up to 365 days, or
• CT-IP for the most recent year that has more than 182 days grossed up to 365 days

A corporation that is the successor corporation of amalgamated corporations must use the total predecessor corporations' CT-IP in the computation of instalments.

A corporation that is involved in a wind-up or rollover must include the subsidiaries' CT-IP or the transferor corporations' CT-IP in the calculation of instalments.

Instalment due dates

For taxation years that end on the last day of a month, instalments (monthly or quarterly) are due by the last day of the following month or quarter. For taxation years that do not end on the last day of a month, instalments are due by the same day of the following month or quarter.

Balance of tax due

The difference between the current year CT-IP and the amounts paid by instalments represents the balance of tax due.

The balance of tax due must be paid within three months after the end of the taxation year, if your corporation was a Canadian controlled private corporation (CCPC) throughout the taxation year and the taxable income in the prior year was less than or equal to $500,000.

The taxable income is grossed up to 365 days if the prior year has less than 51 weeks.

In all other cases, the balance of tax is due within two months after the end of your taxation year.

Interest and penalties

Calculating interest

Interest is calculated and compounded daily for every day that there is a surplus or deficiency in a corporation's account.

The corporation's account is divided, by period of time, into an instalment account and a tax account.

• the instalment account begins on the first day of the taxation year and ends on the day before the balance of tax due date
• the tax account begins on the balance of tax due date which is two months (or three months for a CCPC) after the end of the taxation year

Interest rates

• surplus (overpayment): the ministry pays interest at 3 percentage points below the base rate
• deficiency (underpayment): the corporation pays interest at 3 percentage points above the base rate

The base rate approximates the average prime rate of the major Canadian banks.

A deficiency includes:

• unpaid CT-IP
• interest
• penalties
• other unpaid amounts

Late filing impact

If your tax return is not filed on time, no interest will be paid on any surplus for the period between:

• the due date of the return, and
• the date the return is filed

Delay in processing

You will not be charged interest or penalties if there is a delay in processing your return, as long as you:

• make your instalment payments on time
• pay the balance of CT-IP in full
• file your tax return on time

More about interest rates

Penalties for late or incomplete tax returns

You may be charged a penalty if you file your CT-IP return late or submit an incomplete return.

First late return

If you file one late return, the penalty may be:

• 5% of the deficiency in your tax account for the taxation year at the return due date
• plus an additional 1% for each full month the return is late, up to a maximum of 12 months

Repeated late returns

If you file two late returns within four taxation years, the penalty for the second late return may be:

• 10% of the deficiency in your tax account for the taxation year at the return due date
• plus 2% for each full month the return is late, up to a maximum of 20 months

Corporations Tax – Insurance Premium Tax Return Guide

This guide is intended to help filers accurately complete their Corporations Tax – Insurance Premium Tax Return. It provides detailed explanations for each field in the return, clarifying its purpose and offering step-by-step instructions for entering the required information

File, Pay and View Your Corporations Tax – Premium Tax Return Online

ONT-TAXS Online is the Ministry of Finance’s secure, convenient and free online tax service. It saves time, reduces paper and is available 24 hours a day, seven days a week

Getting started is fast and easy!

Visit ontario.ca/taxservices or call us at 1-866-668-8297

Business Number

Please enter the Corporations Tax – Insurance Premium (CT-IP) Business Number assigned by the Ministry of Finance. It is a 15-digit number containing the 9-digit Business number issued by CRA, “TP” and a 4-digit extension.

Reporting period start and end date

Due date of the return, which is the end of the sixth month following the reporting period end date.

Reference Number

This is a unique number assigned by the ministry to each ONT-TAXS system generated tax return and accompanying schedule(s) issued to a taxpayer. When communicating with the ministry, you must provide this unique Reference Number to identify a particular return/schedule(s), in addition to quoting your CT-IP Business account Number.

Functional currency reporting

A corporation may file its harmonized T2 Corporation Income Tax Return utilizing the functional currency reporting provisions in the federal Income Tax Act (the ITA). Where the CRA has accepted the functional currency reporting, the corporation may file its tax return with the ministry utilizing the same functional currency reporting.

The taxpayer should check the box entitled Functional Currency Election filed under s.261(3)(b) of the ITA, and complete the three boxes below by indicating the:

• functional currency used for the calculation
• exchange rate used for the calculation
• exchange date used for the calculation

Complete lines 1 to 18 in the functional currency. The total Premium Tax on line 18 should be converted to Canadian currency using the relevant spot rate on the balance of tax due date and recorded on line 19. If any instalments are due the instalment payment should be converted to Canadian currency using the relevant spot rate at each instalment due date. Any payments made should be recorded in Canadian currency on line 20.

Completing general questions on the return: (situated top right of the return).

No Premium Tax payable during this reporting period

Corporations that meet the following criteria can check this box and file a nil tax return:

• the taxation year ends after December 31, 2008
• the corporation is not an insurance corporation, generally carrying on business through a permanent establishment in Ontario in the taxation year
• the corporation's premium tax payable for the taxation year is nil

Exemption claimed

Check this box if you are exempt from Premium Tax for any of the following reasons:

• marine insurance premiums (s.74(7)(a))
• premiums payable under contracts of insurance issued on the premium note plan by mutual insurance corporations insuring agricultural and other non-hazardous risks, the sole business of which is carried on in Ontario (s.74(7)(b))
• premiums payable to mutual insurance corporations insuring agricultural and other nonhazardous risks, which are parties to the agreement pursuant to s.169 of the Insurance Act, establishing the Fire Mutuals Guarantee Fund (s.74(7)(c))
• fraternal societies with respect to contracts entered into prior to the first day of January, 1974, (s.74(7)(d))
• mutual benefit societies, pension funds, employees' mutual benefit societies and non-profit medical insurance associations (s.74(7)(e) and (f))

Election filed under s. 74.2 (3.1) of the CTA

Please refer to the Benefit Plan section of our webpage.

Apply credit to future reporting period

Check this box if you have a credit balance and want it applied to the next taxation year.

Final return prior to dissolution

Check this box if the corporation is ceasing operations.

Final return prior to amalgamation

Check this box if the corporation is a predecessor corporation that has undergone an amalgamation under section 87 of the Income Tax Act (ITA), or if the corporation is a subsidiary corporation that has been wound-up under section 88 of the ITA.

Change of control

Check this box if the corporation experienced a change of control. If so, the corporation will have a deemed year end immediately before the change of control date.

Contact the Ministry to advise of the change of control. Filing periods may need to be revised to align with the updated fiscal year end and new tax returns issued.

Transfer or wind-up

Check this box and submit a copy of the Ontario CT Schedule 44 if there has been a transfer (rollover) under subsection 85(1) or 85(2) of the ITA.

Check this box and submit a copy of the Ontario CTT Schedule 24 if the corporation is a parent corporation that has wound-up a subsidiary corporation during the current taxation year under section 88 of the ITA, or if the corporation is a successor corporation and this is the first taxation year after an amalgamation under section 87 of the ITA.

Schedules 24 and 44 can be found on the ministry website at ontario.ca/finance under the Forms and Publications section.

Reporting Taxable Insurance Premiums

Note: this section does not include premiums for Funded or Unfunded Benefit Plans.

Lines 1 to 5

Include the premiums in the relevant column and complete subtotal on line 6. Premiums are to be split into the type of coverage:

• Life
• Accident & Sickness
• Property
• Other

These premiums are also subdivided into the type of premium:

• direct written premiums in Ontario reported in the Annual Statement
• other premiums not reported in the Annual Statement paid in respect of Ontario Residents
• staff premiums on life, accident and sickness on residents in Ontario
• self administered group plans on residents in Ontario
• other direct written premiums

Line 6

Subtotal – add lines 1 through 5.

Line 7

Include any eligible deductible dividends issued, split into the Life, Accident & Sickness, Property and Other types of insurance.

Line 8

Subtotal – subtract line 7 from line 6.

Line 9

Include any sundry adjustments, e.g. fees payable to an administrator or other costs associated with the insurance coverage not already included, split into the columns for Life, Accident & Sickness, Property and Other types of insurance.

Line 10

Include any premiums for any insurance placed with unlicensed insurers.

Line 11

Include net taxable premiums for Reciprocal or inter-insurance exchanges.

Line 12

All premiums in lines 1 through 11 are to be totalled and transferred to the premiums box for lines 13 to 16 as required to determine the Premium Tax Calculation.

Line 13

Life, Accident and Sickness Premiums - add Line 12A and Line 12B times 2% rate.

Line 14

Property Premiums - portion of premiums from Line 12C that are fully taxable times 3.5% rate.

Line 15

Property Premiums - portion of premiums from Line 12C that are subject to 0.5% tax only times 0.5%.

Line 16

Other Premiums - Line 12D times 3%.

Line 17

Benefit Plans (funded or unfunded) premiums reported in the period times 2%.

Line 18

Add lines 13 through 17 to calculate the total taxes owed.

Line 19

Premium Tax in Canadian currency - multiply Line 18 by exchange rate from above if applicable; otherwise same as Line 18.

Line 20

If you are required to make quarterly / monthly installments based on current, 1st prior or 2nd prior, enter the total amount of installments paid for this reporting period.

Line 21

This would be your total balance due. Subtract line 20 from line 19.

Using Return Payment Voucher

Use the Insurance Premium Tax payment voucher if you are making a payment for the return. Note the Balance of Tax Due payment is due 2 months after the year end or 3 months for Canadian Controlled Private Corporations (CCPC). The return is due at the end of the 6^th month from the year end date. The payment due date is stated on the payment voucher.

Further Information

For more information or to make changes to your account, visit the ministry’s website at ontario.ca/finance or contact the Ministry of Finance at: 1-866-668-8297

Calculation of Premium Tax payable

In the calculation section, determine the total Premium Tax on lines 18 and 19, enter the payments made including funds transferred in or transferred out on line 20, and determine the net Premium Tax payable or refundable on line 21. If there is a refund and it should be applied to the next taxation year, check the box Apply credit to future reporting period.

Certification

If a paper tax return is filed, it must be signed and dated by an authorized signing officer. The information contained in the tax return must be true, correct and complete.

The name, title and telephone number of the person signing the tax return must also be printed in the space provided.

In order to discuss this tax return with a third party (such as your accountant or solicitor) the ministry requires proper authorization. An Authorizing or Cancelling a Representative form must be completed and returned to the ministry.

Request a written interpretation

To request a written interpretation on a specific situation not addressed on this page, send your request in writing to:

• email: Advisory Services
• mail: Ministry of Finance, Advisory Services, 33 King Street West, 3rd Floor, Oshawa ON L1H 8H5

Forms and publications

Forms

• Authorizing or Cancelling a Representative
• Direct Deposit Request / Direct Deposit Authorization
• Notice of Revocation of Waiver
• Ontario CT Schedule 24 First-time Filer after Incorporation, Amalgamation, or Winding-up of a Subsidiary into a Parent
• Ontario CT Schedule 44 Non-Arm's Length Transactions
• Waiver of Time Limit for Issuing Assessments/Reassessments

Publications

• Retention/Destruction of Books and Records
• Voluntary Disclosure