Manitoba Imposes 7% RST on Group Insurance Contracts Related to Manitoba Residents
Manitoba’s 2012 Budget applied the province’s 7% Retail Sales Tax (RST) to group insurance contracts that renew or come into effect after July 14, 2012. Manitoba has issued two Information Bulletins, one in May and another update changing things in June. There are no comprehensive guidelines so many of the details are subject to interpretation.
The most recent information indicates that the impacted benefits are group basic, optional and dependant life, group accidental death and dismemberment contracts, group critical illness, group disability (insured contracts) and group creditor insurance. The AD&D, disability and critical illness contracts were added in the June Information Bulletin from what was initially indicated in May. Excluded are contracts that are not group plans (individual insurance contracts), any ASO (self-insured) plans, reinsurance contracts, endowment insurance, annuity contracts and all health care related contracts including prescription drugs, health equipment, vision, ambulance, hospital rooms, dental, counseling and therapy services and long-term care.
It is also noted that all fees and charges invoiced in connection with a taxable contract are also subject to the RST. These fees include administration, placement, risk consultation, consulting and service fees but exclude commission based payments from insurers, ASO fees and financing fees.
All taxable contract premiums that relate entirely to a coverage period after July 14, 2012, are subject to the RST. Cancellations and refund accounting are calculated and remitted as refund amounts for the RST.
If the contract includes coverage of other than Manitoba residents, the tax is only applied to the premiums related to the portion that covers insured Manitoba residents only. If the amount is not readily identifiable in a bulk contract, the ratio of Manitoba residents to the total group is the prorated calculation. If a contract includes both taxable and non-taxable coverage, the value of each component must be segregated in the billing with tax applied to the taxable coverage; otherwise the tax will be applied to the entire value.
This summary is provided as a guideline based on information currently available and is not all inclusive. Further information on The Retail Sales Tax Act and Regulations can be obtained from Manitoba Finance, Taxation Division, or contact your Morneau Shepell consultant.