Telephone: 519-539-8212 | Toll-free: 1-888-539-8212 | Fax: 519-539-7415

Taxation of Group Insurance Plans

Group Insurance plans are subject to both federal and provincial taxes.  

Federal Tax

  • The Goods and Services Tax/Harmonized Sales Tax (GST/HST) is not charged on insured benefits.
  • The tax is charged on the Administration Fee (only) under self-insured plans which do not contain any element of insurance.

Provincial Taxes

  • Insurance Tax, more commonly referred to as Premium Tax, is applicable to every insurance company in Canada.
  • The tax is built into the premium, or charged on plan costs for self-insured plans.
  • The rate varies by province and currently range between 2% and 4%.
  • Retail Sales Tax (RST), also referred to as Provincial Sales Tax (PST), is only applicable in Ontario and Quebec.
  • The tax is charged on the premium, or plan costs, on all plans regardless of whether they are insured or self-insured.
  • The current tax rate in Ontario is 8% and in Quebec it's 9%.

Provincial Taxes Taxability Status of Premiums and Benefits

The following chart outlines the current taxability status of employer contributions towards premium rates under group insurance plans and government programs as well as the taxability status of benefits received under these plans. 

  Is the Employer's Cost Tax Deductible? Are the Employer Contributions Taxable to Employee? Does the Employee pay Income Tax on the Benefit?
Group Insurance Benefit
Life Yes Yes No
Dependent Life Yes Yes No
Critical Illness Yes Yes No
AD&D Yes No* No
Health Yes No*  No
E.A.P. Yes No  No
Health Spending Account Yes No* No
Dental Yes No* No
Weekly Indemnity Yes No  Yes/No**
Long Term Disability Yes No  Yes/No**
Government Benefits   
WSIB Yes No  No
Employment Insurance Yes No  Yes
QPIP Yes No  Yes
CPP Yes No  Yes
OAS Pension n/a n/a Yes
GIS n/a n/a No
The Allowance n/a n/a No

* No for all provinces and territories, except Yes for Quebec.
** Disability benefits are taxable if the employer pays any portion of the premium. If the employee pays the entire premium the benefits are not taxable.
Where the employer's contribution is considered a taxable benefit the applicable Ontario or Quebec Retail Sales Tax on the premium must also be included on the employee's T4 as a taxable benefit.
Some employee contributions may be eligible for a tax deduction or tax credit.

HollisWealth® is a division of Industrial Alliance Securities Inc. (iA Securities), a member of the Canadian Investor Protection Fund (CIPF) and the Investment Industry Regulatory Organization of Canada (IIROC). iA Securities is a trade name and business name under which Industrial Alliance Securities Inc. operates.

This information has been prepared by Paul Green, Portfolio Manager for HollisWealth®, a division of iA Securities, and does not necessarily reflect the opinion of iA Securities. The information contained in this website comes from sources we believe to be reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any the securities mentioned. The information contained herein may not apply to all types of investors. Paul Green and Dave Harris, Portfolio Managers, can open accounts only in the provinces where they are registered. For more information about HollisWealth®, please consult the official website at Green Private Wealth Counsel is a personal trade name of Paul Green.

Insurance products provided through Hollis Insurance Inc.