Quebec budget: Compensation tax on insurance premiums

The Quebec government’s budget tabled on March 28, 2017 delayed, by five years, the decrease in the compensation tax on insurance premiums, thereby depriving plan sponsors of an expected reduction of 0.18% in this tax.

In December 2014, the Quebec government raised the compensation tax on insurance premiums and on amounts established in respect of an insurance fund from 0.30% to 0.48%. This increase was scheduled to end on April 1, 2017. Some insurers even incorporated the reduced tax in their rate renewal conditions for 2017.

Note that Quebec imposes the heaviest tax burden on group insurance plans in Canada. In addition to the 0.48% compensation tax, the 3% insurance premium tax and the 9% non-refundable sales tax, Quebec is the only province where the employer’s contribution to group medical and dental insurance plans is a taxable benefit for employees.

Apart from this, the March 28 budget did not contain any other significant provision that could have an impact on employee benefits or pension plans.

News & Views - April 2017 (PDF)