Insurance industry Key tax rates and updates www.pwc.com/ca/insurancekeytaxrates

www.pwc.com/ca/insurancekeytaxrates
Insurance
industry
Key tax rates and updates
Tax changes, rates,
deadlines and other
useful information
for the insurance
industry in Canada.
2015
Insurance industry:
Key tax rates and updates
This booklet is available at:
www.pwc.com/ca/insurancekeytaxrates
Contents
Recent tax changes: Selected highlights ................................................................ 1
Recent tax cases...................................................................................................... 7
Key tax dates .......................................................................................................... 8
Canadian premium and fire tax – Rates and deadlines .......................................... 9
Sales tax – Rates and deadlines ............................................................................ 10
Corporate income tax rates for 2015 .................................................................... 11
Capital tax rates for 2015 ..................................................................................... 12
Publications ......................................................................................................... 13
Insurance help—Who to contact
For more information, please contact:
•
your PwC insurance industry adviser
•
any of our insurance industry advisers listed at
www.pwc.com/ca/insurancecontacts, or:
Jason Swales
Tax Financial Services Leader
416 815 5212
[email protected]
Yves Magnan
Corporate Tax Services
514 205 5194
[email protected]
Mario Seyer
Indirect Tax Services
514 205 5285
[email protected]
Allan Buitendag
National Insurance Leader
416 815 5239
[email protected]
Some cautions
Rates and other information are current to August 20, 2015, but may change as a result of
legislation or regulations issued after that date.
This booklet is published with the understanding that PricewaterhouseCoopers LLP (PwC) is not
thereby engaged in rendering accounting, legal or other professional service or advice. Comments
in this booklet are not intended to constitute professional advice, nor should they be relied upon to
replace professional advice.
No part of this booklet may be reproduced without permission from PwC.
1
Recent tax changes: Selected highlights
Corporate income tax rates for 2015
Combined federal and provincial/territorial corporate income tax rates are
listed on page 11.
Status of changes for accounting purposes
Income tax changes will be recognized for accounting purposes:
• in Canada if they are considered substantively enacted
• in the United States if they are enacted
Tables on pages 4 and 6 show whether corporate tax rate changes effective after
2013 are recognized for accounting purposes. All information is current to
August 20, 2015.
Federal changes
Eligible capital property (ECP) regime
Draft legislative proposals that replace the ECP regime with a new capital cost
allowance class and include transitional rules will be released for comment.
Life insurers and policyholders
Key changes affecting the taxation of life insurance policies, generally issued after
2016, amend the determination of:
• whether a life insurance policy is an exempt policy
• what types of transactions give rise to a disposition of an interest in a policy
• the tax treatment of a disposition of an interest in a policy (having regard to
both the adjusted cost basis of the interest and the proceeds of disposition)
Consequential amendments were also made to the life insurer’s investment
income tax.
Avoidance of corporate capital gains
For dividends received after April 20, 2015, the anti-avoidance rule in section 55
of the Income Tax Act, which generally taxes as capital gains certain otherwise
tax-deductible inter-corporate dividends in certain situations, is proposed to be
amended to address various matters, including to ensure it applies when one of
the purposes for a dividend is to effect a significant:
• reduction in the fair market value of any share, or
• increase in the total cost of properties of the dividend recipient
Synthetic equity arrangements
For dividends paid or that become payable after April 2017 (after October 2015,
for agreements or arrangements generally entered into, acquired, extended,
renewed or modified after April 21, 2015) the dividend rental arrangement
rules are modified to deny the inter-corporate dividend deduction on dividends
received by a taxpayer on a Canadian share in respect of which there is a synthetic
equity arrangement. Certain exceptions are provided.
2
Trusts and estates
Starting 2016 taxation years:
• a flat top-rate tax (instead of graduated tax rates) will apply to testamentary
trusts, estates, and grandfathered inter vivos trusts; however, certain
testamentary trusts will be able to use graduated tax rates
• testamentary trusts, other than graduated rate estates, will be required to have
calendar taxation years
• the amount that a trust can designate as not having been paid or payable to a
beneficiary will be limited
• the tax on taxable capital gains that arise in spousal trusts (testamentary or inter
vivos), joint spousal trusts, alter ego trusts or self-benefit trusts on the death of
certain individuals, will be payable by the deceased individual’s estate because
the taxable capital gain will be deemed payable to that estate
See our Tax Insights “New tax rules for testamentary trusts: The bad and the good
(and some surprises)” at www.pwc.com/ca/taxinsights.
Foreign property reporting
For taxation years beginning after 2014, taxpayers whose total cost of foreign
property is less than $250,000 throughout the year can report the property using a
simplified foreign asset reporting form.
Withholding tax for non-resident employers
Certain non-resident employers with non-resident employees working temporarily in
Canada will be exempt from payroll withholding requirements, effective January 1,
2016. See our Tax Insights “Canadian payroll relief clarified for foreign employers
with frequent business travellers to Canada” at www.pwc.com/ca/taxinsights.
Captive insurance
For taxation years beginning after February 10, 2014, an anti-avoidance rule in the
foreign accrual property income (FAPI) regime was clarified to ensure that it applies
to certain captive insurance arrangements, commonly known as “insurance swaps.”
Subsequently, additional measures to further tighten this anti-avoidance rule were
introduced. For taxation years that begin after April 20, 2015, if a foreign affiliate
cedes a portfolio of Canadian risk in exchange for a portfolio of foreign risk, the
difference between the fair market value and the cost of the Canadian risks will be
included in computing the affiliate’s FAPI.
Demutualization of property and casualty (P&C) insurers
Effective July 1, 2015, a regulatory framework provides a process for mutual P&C
insurers to demutualize and convert into a stock insurance company.
Automatic exchange of information
Starting July 1, 2017, Canada will implement the new common reporting standard
for automatic information exchange developed by the Organisation for Economic
Co‑operation and Development (OECD), allowing a first exchange of information
with other countries in 2018.
3
Treaty shopping
On September 16, 2014, the OECD released “Preventing the Granting of Treaty
Benefits in Inappropriate Circumstances – Action 6: 2014 Deliverable,” largely
adopting a treaty-based approach to address treaty abuse. Canada’s February 11,
2014 federal budget announced the federal government was conducting a
consultation on a proposed domestic rule to prevent treaty shopping.
However, on August 29, 2014, the Department of Finance stated that it had instead
decided to await further work by the OECD and the Group of 20 in relation to the
Base Erosion and Profit Shifting (BEPS) initiative. Canada’s April 21, 2015 budget
did not include a recommendation for a specific approach to deal with abusive
treaty shopping, because the federal government continues to monitor OECD
recommendations on this front.
Tax Information Exchange Agreements (TIEAs)
Canada is negotiating seven TIEAs and has signed one that is not in force. Twentytwo have entered into force (one on behalf of five jurisdictions).
Automobile deductions and benefits
The 2015 prescribed rates for automobiles for purposes of determining tax-exempt
allowances are 1¢ per kilometre higher than for 2014. All other 2015 prescribed rates
will remain at their 2014 levels. For more information, see Car expenses and benefits
– A tax guide at www.pwc.com/ca/carexpenses.
Registered retirement income funds (RRIFs)
Commencing 2015, the minimum annual withdrawal amount for RRIF holders age
71 to 94 will be reduced. RRIF holders who have already withdrawn more than the
2015 minimum amount can recontribute the excess until February 29, 2016, and
deduct it in 2015.
Retirement savings plans and deferred profit sharing plans
Contribution limits for retirement savings plans and profit sharing plans are
increasing:
2014
2015
2016
2017
Registered retirement
savings plans
(RRSPs)
Defined contribution
registered pension plans
(RPPs)
Deferred profit
sharing plans
(DPSPs)
$24,270
$24,930
$25,370
$24,930
$25,370
$12,465
$12,685
Indexed
Defined benefit registered pension plans (RPPs)
The maximum pension benefit that can be paid from these plans is increasing:
Pension benefit
(per year of service)
2014
2015
2016
$2,770
$2,819
Indexed
4
Notice of assessment
For appeals made after royal assent to the enacting legislation, clarifications will
ensure that the Canada Revenue Agency and the courts can increase or adjust an
amount included in an assessment while that assessment is under objection or
appeal, but only if the total amount of the assessment does not increase.
Status of outstanding draft legislative proposals
The Department of Finance indicated that the following tax proposals that were
announced before April 1, 2013, but were not passed into law by that date will not
proceed:
• interest deductibility
• reasonable expectation of profit measures
• loss of mutual fund trust status
See our Tax Insights “Outstanding legislative tax proposals announced before April 1,
2013: Where do they stand?” at www.pwc.com/ca/taxinsights.
Goods and Services Tax/ Harmonized Sales Tax (GST/HST):
Reinsurance premiums paid to non-resident related parties
The Department of Finance has clarified its “policy intent” for determining the
amount of GST/HST that is payable by Canadian-resident insurers on reinsurance
premiums paid to non-arm’s length non-resident insurers. Uncertainty had stemmed
from the broad definition of “loading” in section 217 of the Excise Tax Act and the
policy reasons for enacting special self-assessment rules for financial institutions.
See our Tax Insights “GST/HST alert: Reinsurance premiums paid to non-resident
related parties—An update” at www.pwc.com/ca/taxinsights.
Provincial changes
Alberta
General corporate income tax rate
Alberta’s general corporate income tax rate increased:
Rate
Recognized for accounting
purposes?
Canada
Effective
date
Before July 1, 2015
July 1, 2015
10%
12%
US
Yes
Insurance premiums tax
Alberta’s March 26, 2015 budget had announced that on April 1, 2016, the insurance
premiums tax rates would increase by one percentage point to:
• 3% on premiums for life, accident and sickness insurance
• 4% for other insurance
Because a new government was formed after the May 5, 2015 Alberta election, it
is uncertain whether this rate increase will proceed. It is expected Alberta’s new
government will release a new budget in the fall of 2015.
5
Insuring Canadian operations with offshore insurers
Under an agreement between Alberta’s Superintendent of Insurance and the Alberta
Tax and Revenue Administration (TRA), the TRA’s income tax auditors will be
reviewing Alberta corporate taxpayers (and indirectly, their non-resident affiliates)
for compliance with Alberta’s 50% tax for insurance placed on Alberta risks with
insurers who are not licensed to carry on an insurance business in Alberta. See
our upcoming Tax Insights “Do you insure your Canadian operations with offshore
insurers? If so, you may be liable for tax!” at www.pwc.com/ca/taxinsights.
Manitoba
Data Processing Investment Tax Credits
The credits are extended by three years to December 31, 2018. In addition,
retroactive to January 1, 2014, the Data Processing Centre Investment Tax Credit is
broadened by:
• including new data processing centres built in Manitoba and leased to another
Manitoba company that is not affiliated with the lessor
• allowing taxpayers eligible for the credit to include data processing centres built
using a business structure that is not a corporation
Newfoundland and Labrador
Harmonized Sales Tax (HST)
On January 1, 2016, the HST rate will increase from 13% to 15% (the provincial
portion of the HST will increase from 8% to 10%).
Nova Scotia
Tax, regulatory and fee review
Nova Scotia will consider the recommendations in the November 2014 Tax and
Regulatory Review Report by consulting with Nova Scotians and creating a tax
working group to consider implementation challenges and opportunities.
Ontario
General corporate income tax rate
This rate is frozen at 11.5% until the province returns to a balanced budget
(scheduled for 2017-2018). It was to have dropped to 11% on July 1, 2012, and to
10% on July 1, 2013.
Ontario retirement pension plan (ORPP)
Under the proposed ORPP, employers and employees that do not already participate
in a comparable pension plan will each be required to contribute up to 1.9% on a
maximum annual earnings of $90,000 (maximum annual contributions of $1,710
each). Contributions would be phased-in, starting 2017, reaching 1.9% by 2021.
Benefits would be paid starting 2022 and would aim to provide an annual pension
of 15% of an individual’s earnings up to $90,000 (maximum annual pension of
$13,500). Amounts are in 2014 dollars and would be indexed.
6
Quebec
General corporate income tax rate
Quebec’s general corporate income tax rate will decrease:
Rate
Recognized for accounting
purposes?
Canada
Effective
date
Before January 1, 2017
January 1, 2017
January 1, 2018
January 1, 2019
January 1, 2020
11.9%
11.8%
11.7%
11.6%
11.5%
US
Not as of August 20, 2015
Compensation tax for insurers
Quebec’s compensation tax on insurance premiums is changing:
Rate
Effective
date
Before December 3, 2014 0.3%
December 3, 2014 0.48%
April 1, 2017 0.3%
April 1, 2019 Nil
Insurance premium tax
The tax rate on capital imposed on insurance corporations increased from 2% to 3%
on:
• premiums payable, relating to the life, health or physical well-being of the
insured
• taxable premiums paid, as part of an uninsured employee benefit plan,
to an insurance corporation or its agent, for taxation years ending after December 2,
2014 (pro-rated for taxation years straddling December 2, 2014).
Refundable tax credit for on-the‑job training periods
For eligible expenditures generally incurred after March 26, 2015:
• base rates will increase for corporations, from 24% to 40%, and for individuals,
from 12% to 20%
• higher rates will increase for a person with a disability, from 32% to 50%,
and for immigrants, from 16% to 25%, and will be available only if additional
conditions are met
Aggressive tax planning transactions
The scope of transactions that must be disclosed to the tax authorities will be
broadened, generally for transactions carried out as of March 26, 2015.
Retail sales tax on automobile insurance premiums
Quebec’s retail sales tax rate on automobile insurance premiums increased to 9%
from 5% for premiums paid after December 31, 2014.
7
British Columbia, New Brunswick, Northwest Territories, Nunavut,
Prince Edward Island, Saskatchewan and Yukon
No significant changes were made to the rules that apply to insurers in British
Columbia, New Brunswick, the Northwest Territories, Nunavut, Prince Edward
Island, Saskatchewan or the Yukon.
Recent tax cases
The following recent tax case may be of interest.
Life insurer not entitled to bump in cost base of “designated
insurance property”
In The Standard Life Assurance Company of Canada v. The Queen, the Tax
Court of Canada (TCC) agreed with the Minister that the taxpayer was not entitled
to a bump in cost base of its “designated insurance property” in the 2006 and
2007 taxation years, resulting in a significant increase in the taxpayer’s taxable
income. The taxpayer, a Canadian life insurance company, argued that it met the
requirements for the bump in cost base because for 2006 and 2007, it carried on an
insurance business in both Canada and Bermuda (through a branch), and that the
statutory interpretation of “designated insurance property” was met.
The Income Tax Act provides that if “property of a life insurer resident in Canada that
carries on an insurance business in Canada and in a country other than Canada, is
designated insurance property of the insurer for a taxation year, was owned by the
insurer at the end of the preceding taxation year but was not designated insurance
property of the insurer for that preceding year, then the insurer is deemed to have
disposed of that property at the beginning of the year for fair market value proceeds
and to have reacquired it for such fair market value without having to realize a gain
or loss from the deemed disposition.”
The TCC found that the taxpayer did not factually carry on business in Bermuda in
2006 or 2007 and the statutory interpretation of “designated insurance property”
was not met.
Valuation of option contracts
In Kruger Incorporated v. Her Majesty the Queen, the TCC considered whether
Kruger was entitled, in computing its income for the 1998 taxation year, to deduct
$91 million relating to a “mark-to-market” adjustment on unrealized foreign
exchange option contracts, some of which Kruger had written, and others it had
purchased. Kruger also submitted that it held the options as inventory and could
therefore carry them at fair market value.
The TCC did not permit Kruger to value its option contracts on a mark-to-market
basis. However, the TCC accepted that the purchased option contracts were
inventory of Kruger’s business of speculating in option contracts and could therefore
be valued at fair market value. In addition, the TCC found that the options Kruger
itself had written were obligations, i.e. liabilities, rather than property that could
be classified as inventory. Accordingly, any costs to satisfy the obligations could be
deducted only when the contracts were settled.
See our Tax Insights “TCC’s decision in Kruger: Valuation of option contracts” at
www.pwc.com/ca/taxinsights.
8
Key tax dates
The following Canadian tax dates for insurance companies are based on a
December 31 fiscal year end. Deadlines falling on holidays or weekends may
be extended to the next business day. (Filing dates for miscellaneous matters
affecting insurers in Canada, such as provincial taxes, licences, fees, permits and
municipal taxes, are not covered.)
Payments
Federal tax dates
Instalments
Some Canadian-controlled
private corporations
Corporate income tax;
Financial institutions
capital tax
All other insurers
Balance
Last day
of each month1
Life insurer’s investment income tax
Branch tax
Non-resident tax
T2016
Transactions with
non-residents
NR42
June 30
n/a
15 months
after year end
T1134
Financial institution GST/HST
annual information return5
June 30
March 31
T11353, T1141 and T1142
Insurers not registered for GST
that import taxable supplies
April 30
1 month after month of importation
GST111/RC72915
n/a
June 30
Payments
Provincial tax dates
Capital tax
February 28
June 30
Federal excise tax – insurance premiums4
Corporate income tax
(Alberta; Quebec)
March 31
Related-party transactions: T106
Foreign property
reporting
Returns
Some Alberta Canadiancontrolled private corporations
All other insurers
Instalments
Balance
Last day
of each month1
March 31
Returns
June 30
February 28
Life insurers in Ontario
Same as federal corporate income tax
Life insurers in Quebec
Same as provincial corporate income tax
1.Canadian-controlled private corporations can pay federal and Quebec instalments quarterly (rather than
monthly) if certain conditions are met.
2.The payer in a transaction with a non-resident is required to remit withholding tax on or before the 15th of
the month following the month the amount was paid or credited to the non-resident.
3.A simplified foreign asset reporting form is available for certain taxpayers. See page 2.
4.The tax applies to premiums for the insurance of Canadian risks, other than premiums for life insurance,
personal accident insurance, sickness insurance or marine insurance. Premiums in respect of reinsurance
contracts or for insurance that is not available within Canada are also not subject to the tax. The
policyholder is responsible for remitting the tax by April 30 of the year following the calendar year in which
the premiums were paid or became payable.
5.Financial institutions that have total income exceeding $1 million and are:
• GST/HST registrants (but not QST registrants) must file Form GST111
• GST/HST and QST registrants must file Form RC7291
A QST registrant (that is not a GST/HST registrant) that meets the criteria must file Form FP-2111-V with
Revenu Québec.
9
Canadian premium and fire tax – Rates and deadlines
Rates1
Deadlines
Premium tax
Instalments
Life,
Property and
accident and
casualty
sickness
Fire tax2
Premium tax
Alberta3
3%3
Nil
4.4%
British
Columbia4
2%
3
1.25%
Manitoba
1%
New
Brunswick
3%
4%
6
6
Nil
3% or 4%
4%
2%
3%
2%
3% or 3.5%7
1.25%
Nil
3.5%
1%
3.48%8
Nil
1%
Nil10
4%
2% or 3%10
Not required
If prior year’s tax
payable exceeds
$25,000, 15th of June,
September
and December
Last day of April, July,
October and January
Last day of June,
September and
December
Newfoundland
and Labrador
NWT &
Nunavut
Varies5
Nova Scotia
60 days after end of
each quarter
3%
Ontario
Prince Edward
Island
Quebec
9
Saskatchewan
Yukon
Fire tax
Return and
balance due
75 days
after year end
March 31
March 15
March 20
Not required
March 15
Premium:
60 days
after last quarter
Fire: March 31
Return: 6 months
after year end
Balance due:
Varies7
Same as federal
income tax (page 8)
3 months
Last day of each quarter
after year end
Same as provincial income tax (page 8)
Not required
March 15
1. The rates in the table apply to licensed insurers. Different rates may apply to unlicensed insurers in some jurisdictions.
2. Fire tax rates are levied under Fire Prevention Act or similar legislation of each jurisdiction. For Northwest Territories,
Nunavut and Yukon, footnotes 6 and 10 set out rates levied under other legislation relating to fire insurance premiums.
3. Alberta’s premium tax rates may increase. See page 4.
4. British Columbia’s premium tax rate on property insurance and automobile insurance is 4.4%. A rate of 4% applies
to most other types of insurance not referred to in the table.
5. Newfoundland and Labrador’s instalment deadlines are shown in the table below.
6. Northwest Territories and Nunavut impose an additional 1% tax on gross premiums in respect of fire insurance.
7. Ontario levies a premium tax rate of 3.5% on
Newfoundland and Labrador
property insurance. Ontario’s instalment
deadlines are shown in the table to the right.
Previous year’s tax
Instalment deadlines
8. Quebec rates include 0.48% compensation tax
> $1,000,000
20th day of each following month
on insurance premiums. The compensation tax
> $500,000 but < $1,000,000
20th of April, July, October and January
will be 0.3% after March 31, 2017, and nil after
> $100,000 but < $500,000
20th of July and January
March 31, 2019. See page 6 for the rates that
< $100,000
Not required
applied before December 3, 2014, to:
• the compensation tax on insurance premiums
Ontario
• life, accident and sickness premiums
Current or previous year’s tax
Instalment deadlines
9. Saskatchewan imposes an additional 1%
> $10,000a
One month after month endb
tax on gross premiums in respect of motor
> $2,000 but < $10,000
vehicle insurance. Its premium tax rate on hail
Three months after quarter endb
insurance is 3%.
< $2,000
Not required
10. Yukon imposes an additional 1% tax on gross
a. This threshold must be met in both the current and previous year.
premiums in respect of fire insurance and
b. For taxation years that do not end on the last day of a month,
property damage insurance.
instalments are due by the same day of the following month or quarter.
10
Sales tax – Rates and deadlines
Tax
Rate
Balance and returns
Filing conditions
Reporting period
Fiscal year
Fiscal quarter
Fiscal month
Default (Registrant)
Federal
GST1
5%
Elected (Registrant)
Alberta
Manitoba
PST
7%
Annual
tax
Monthly
tax
> $3,000 to $6,000
> $6,000 to $12,000
> $12,000
< $500
$500 to $4,999
> $5,000
Fiscal quarter,
semi-annual or year
Fiscal quarter or
semi-annual
Fiscal month or
quarter
Fiscal month
Calendar year
Calendar quarter
Calendar month
PST
8%4
HST
13%5
Same as federal GST
HST
15%
No territorial sales tax
Same as federal GST
No territorial sales tax
New Brunswick
Newfoundland and
Labrador
Northwest Territories
Nova Scotia
Nunavut
Ontario
Prince Edward Island
Quebec
HST 13%6
HST 14%
QST 9.975%7
Saskatchewan
PST
Yukon
1 month2
No provincial sales tax
< $3,000
British Columbia
Due after
6 months2,3
5%
1 month
20 days
Same as federal GST
Annual
tax
Same as federal GST
< $3,600
Calendar year
$3,600 to $7,200
Calendar quarter
> $7,200
Calendar month
No territorial sales tax
20 days
GST = Goods and Services Tax
HST = Harmonized Sales Tax
PST = Provincial Sales Tax
QST = Quebec Sales Tax
1. Instead of the GST, a 5% First Nations Goods and Services Tax (FNGST) applies in certain First Nations.
2. Every registered insurer that is an annual filer and is a:
• GST/HST (but not a QST) Selected Listed Financial Institution (SLFI), must file Form GST494
•G
ST/HST and QST SLFI (or a QST SLFI but not a GST/HST SLFI), must file Form RC7294 within six months
of its fiscal year reporting period
Every registered and non-registered* insurer that is a monthly or quarterly filer and is a:
•G
ST/HST (but not a QST) SLFI, must file: (i) interim returns on Form GST34 (registered insurers) or Form
GST62 (non-registered* insurers) within one month after the end of its reporting period, and (ii) a final
return on Form GST494 within six months of its fiscal year
• GST/HST and QST SLFI (or a QST SLFI but not a GST/HST SLFI), must file: (i) interim returns on Form
RC7200 (registered insurers) or Form RC7262 (non-registered* insurers) within one month after the end of
its reporting period, and (ii) a final return on Form RC7294 within six months of its fiscal year
Every registered insurer that is not a SLFI must file Form GST34 within either six months of its fiscal year
reporting period, or one month after the end of its monthly or quarterly reporting period.
Every non-registered* insurer that is not a SLFI must file Form GST62 within one month after the end of its
monthly reporting period.
* Non-registered insurers must have a monthly reporting period.
3. An annual filer is required to make GST/HST and/or QST quarterly instalments (equal to ¼ of “net tax”) within
one month after the end of each fiscal quarter. Instalments are waived if the “net tax” (on line 109 of the
GST/HST return or line 209 of the QST return) is less than $3,000.
4. Manitoba also applies an 8% retail sales tax (RST) on certain insurance premiums. Manitoba’s PST (which also
applies to its RST) will decrease to 7% on July 1, 2023.
5. Newfoundland and Labrador’s HST rate will increase from 13% to 15% on January 1, 2016.
6. Ontario imposes a retail sales tax of 8% on premiums paid by persons carrying on business in Ontario and in
respect of property situated in Ontario, excluding insurance of farm property, individual life or health policies,
marine insurance, and amounts payable under a reinsurance contract, an annuity contract or to obtain a surety.
7. Quebec also imposes a 9% retail sales tax on:
• automobile insurance premiums (5% if paid before January 1, 2015)
• other insurance premiums, with certain exceptions, e.g. individual life and health
11
Corporate income tax rates for 2015
The following rates, which have been pro-rated for a December 31, 2015 year
end, apply to insurance companies. For Canadian-controlled private property
and casualty insurers, lower rates may apply on up to $500,000 of active business
income ($425,000 in Manitoba and $350,000 in Nova Scotia).
Basic federal rate
38%
Provincial abatement
-10%
General rate reduction
-13%
Total federal rate
15%
Provincial/
Territorial
Provincial/Territorial
+ 15% federal
11.01%1
26.01%
British Columbia
11%
26%
Manitoba
12%
27%
12%
27%
Alberta
New Brunswick
Newfoundland and Labrador
14% H
29%
Northwest Territories
11.5%
26.5%
Nova Scotia
16%
31%
Nunavut
12%
2
Ontario
Prince Edward Island
Quebec
27%
1
11.5%
26.5%
16%
31%
11.9% H
26.9%
Saskatchewan
12%
27%
Yukon
15%
30%
1
H Tax holidays are available to certain corporations.
1. Recent and future income tax changes are outlined on pages 4 to 6.
2. Ontario corporations that, on an associated basis, have gross revenues of $100 million or more and total
assets of $50 million or more, may have a corporate minimum tax (CMT) liability based on adjusted book
income. CMT is payable to the extent that it exceeds the regular Ontario income tax liability.
12
Capital tax rates for 2015
Life1
Federal
Part VI financial
institutions
2
capital tax
On first $1 billion taxable capital
On taxable capital > $1 billion
Non-life1
Nil
1.25%
Alberta
British Columbia
Manitoba
New Brunswick
No capital tax
Newfoundland and Labrador
Northwest Territories
Nova Scotia
Nunavut
On taxable capital < $10 million
Ontario3
and
Quebec4
Nil
On taxable capital > $10 million and < $50 million
0.625%
On taxable capital > $50 million and < $100 million
0.9375%
On taxable capital > $100 million and < $200 million
1.25%
On taxable capital > $200 million and < $300 million
0.625%
On taxable capital > $300 million
0.3125%
Prince Edward Island
Saskatchewan
Yukon
1.All rates in this table are for a December 31, 2015 year end. When applying the thresholds, taxable
capital of all companies in a group is considered.
2.The federal Part VI tax is reduced by the corporation’s federal income tax liability. Any unused
federal income tax liability can be applied to reduce the Part VI tax for the previous three years and
the next seven.
3.Ontario capital tax may be reduced by the Ontario income tax and corporate minimum tax payable for
the year.
4.Quebec capital tax may be reduced by the Quebec income tax payable for the year.
13
Publications
PwC issues numerous thought-leadership publications, including those listed below,
for Canadian and international insurance and financial services industries.
Copies can be obtained from our website at www.pwc.com or by contacting any of
our Canadian insurance industry advisers, listed at the front of this booklet.
Insurance Review:
A Canadian perspective
This periodic publication discusses the challenges and
opportunities facing the insurance industry. It is available at
www.pwc.com/ca/insurance. To subscribe, please email
[email protected].
Insurance Club EyeOpener Webcast and Breakfast Series
This series discusses the key trends affecting insurers
on a variety of topics. Webcast series are available at
www.pwc.com/ca/insurance. To be part of the
quarterly breakfast seminars in Toronto, please email
[email protected].
The insurance industry in 2015 – top issues:
An annual report
This publication discusses the challenges and opportunities confronting
insurers and how to adapt to change. Topics include: the central role of
advanced analytics in modernizing business models and operations;
recent, pending and potential regulatory and insurance taxation
developments; market and business developments and operational
change. To download it, visit www.pwc.com/us/insurance.
Insurance Banana Skins 2015:
The CSFI survey of the risks facing insurers
This survey of the leading members of the insurance industry
identifies potential sources of risks to the industry and ranks them by
severity. It provides insights into the multitude of risks insurers face
globally and focuses attention on addressing risk in an organization.
It also questions insurers on current risks, future trends and their
preparedness to respond to the risk environment. To download a
copy, visit www.pwc.com/insurance.
14
Insurance Banana Skins 2015: The Canadian results
The Insurance Banana Skins survey features 37 responses from
Canadian insurers. Regulation, cyber risk, low interest rates,
change management and climate change topped the list of
concerns for Canada’s insurers. For a copy, visit
www.pwc.com/ca/insurance.
Insurance 2020 & beyond:
Equipping your business for the global tax revolution
This paper discusses the changing tax landscape and how insurers
are re-evaluating their tax functions. Key priorities include:
developing and implementing a modernized tax control framework;
considering automation of data extraction and review processes;
and shifting the focus of tax optimization from reducing to paying
an appropriate amount of tax and ensuring that tax policies stand
up to current and future scrutiny. It is available at
www.pwc.com/insurance.
Insurance 2020 & beyond:
Necessity is the mother of reinvention
This paper reviews the trends reshaping the insurance industry and
what the industry will look like by 2020. Insurers need to look at how
to keep pace with the sweeping social, technological, environmental,
economic and political developments ahead. To download a copy, visit
www.pwc.com/insurance.
Reinsurance 2020: Taking control of your destiny
This paper explores the difficulties reinsurers face and sets out
various business models that may offer success in this new market
landscape. Reinsurers must have a clear focus on cost, risk insight
and innovation to break away from competitors. Get a copy at
www.pwc.com/insurance.
Broking 2020: Leading from the front in a new era of risk
This paper looks at the emerging risks that are reshaping the
insurance marketplace and what would enable insurance brokers
to lead this challenge and come out in front. For a copy, visit
www.pwc.com/insurance.
15
fs viewpoint – Threat smart: Building a cyber resilient
financial institution
This publication discusses cyber risk and how to build a cyber
resilient organization. It is available at
www.pwc.com/us/financial-services.
18th Annual Global CEO Survey – Turning disruption to your
advantage: Insurance industry summary
PwC’s 18th Annual Global CEO Survey finds that insurance CEOs
are most likely to see regulation as a source of disruption, creating
upheaval and more costs on the one side and diverting attention
from other strategic challenges on the other. For the key insurance
industry findings, download this publication at
www.pwc.com/ceosurvey.
Swales and Erinc, Canadian Insurance Taxation, 4th_stacked logo__ 19/08/2015 11:02 AM Page 1
Swales
Erinc
• your PwC insurance industry adviser
• any of our insurance industry advisers listed at
www.pwc.com/ca/insurancecontacts
FOURTH
EDITION
The fourth edition will help insurers identify potential tax
problems, make better business decisions and be more effective
when discussing these matters with professional advisers. For
more information, please contact:
Canadian Insurance Taxation
Canadian Insurance Taxation (Fourth Edition)
— coming December 2015
ISBN 978–0–433–48532–2
When available, a copy can be ordered through LexisNexis
Canada Inc. at store.lexisnexis.ca/store/ca.
Canadian
Insurance
Taxation
[ FOURTH EDITION ]
Jason Swales
Erdem Erinc
Value, on your terms
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