Direct Tax on Employee Benefits

The federal government charges 5% GST/HST on benefit administration fees and provincial governments add their share of the HST, as well as retail sales tax (RST) and provincial premium tax (PPT).

Provincial Premium Tax (PPT)

Provinces and territories charge a premium tax on employee benefit insurance premiums and related fees. Ontario, Quebec and Newfoundland also charge the tax on uninsured arrangements whether they are professionally administered as Administrative Services Only (ASO) as well as self-administered benefits.

Provincial Retail Sales Tax on Benefit Costs
Rate Jurisdiction Insured Plans Uninsured Plans
4% Newfoundland Yes Yes
3.5% Prince Edward Island Yes No
3% Alberta,
Saskatchewan,
Nova Scotia,
North West Territories,
Nunavut
Yes No
3.48% Quebec Yes Yes
2% Ontario Yes Yes
2% All other jurisdictions Yes No

 

Provincial Retail Sales Tax (RST)

Some provinces continue to charge retail sales tax on employee benefits even after introducing Harmonized Sales Tax.

Provincial Retail Sales Tax on Benefit Costs
Rate Jurisdiction Tax Base
8% Ontario group life and health benefits, including Provincial Premium Tax (PPT)
if the PPT forms part of the premium billed by an insurer.
9% Quebec group life and health benefits
8% Manitoba group life & disability insurance benefits

 

Federal Goods and Services Tax (GST) / Harmonized Sales Tax (HST)

The federal government charges 5% GST or HST on the administration charges for benefits based on the primary location of the employer and the provinces with HST add their portion.

GST / HST on Benefit Administration Fees
Rate Tax Jurisdiction
15% HST Nova Scotia
14% HST Prince Edward Island
13% HST Ontario, New Brunswick, Newfoundland and Labrador
14.975% HST Quebec
5% GST All other jurisdictions