Tax on insurance premiums in Saskatchewan coming soon

With its March 2017 budget, Saskatchewan expanded its tax base to include provincial sales tax (PST) on individual life, accident and health insurance premiums — a broader approach than taken by other provinces on insurance premiums.

The tax is effective August 1, 2017.

In a LinkedIn post, Ami Maishlish, president of CompuOffice Software, notes that for taxpayers, the PST is essentially a tax on a tax. That’s because the province already collects a 3% premium tax on these insurance premiums.

Further, the new tax could also be considered a tax on borrowing.

That’s because, for premiums paid monthly, the tax is essentially applied to the financing cost hidden within premiums.

“As such, Saskatchewan’s budget […] distorts the tax treatment of borrowing — charging PST on the cost of financing insurance premiums by the insurer while exempting the financing of the same premiums if done by loans from other financial institutions,” he says.

He warns that other provinces could follow suit.

Read the full post.

Individual permanent life insurance policies, including whole and universal life insurance, in effect prior to August 1, 2017, are exempt from PST, including all future premium payments with respect to these policies — so let suitable clients know. New individual permanent life insurance policies effective after July 31, 2017, will be subject to PST.

Charging PST on insurance premiums is expected to increase Saskatchewan’s revenue by $157.9 million for 2017-2018.

Also read:

Leveraging life insurance policies

Insurers lose genetic testing fight

Ontario raises limits for disability support

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.