Canada: Increased audit activity related to annual federal 10% excise tax on cross-border insurance premiums

Businesses need to carefully review their insurance coverage

Businesses need to carefully review their insurance coverage

The Canada Revenue Agency (CRA) has recently increased its audit activities related to the annual federal 10% excise tax on cross-border insurance premiums, and is sending excise tax returns to businesses with foreign head-offices. Many businesses with such insurance coverage for risks in Canada, including cyber insurance and property insurance, must pay this tax every year by 30 April. Read TaxNewsFlash

KPMG observation

Businesses need to carefully review their insurance coverage and determine whether they have met all related federal and provincial tax obligations.

As a reminder, many businesses that purchased insurance coverage from insurers outside Canada in 2021, or had insurance coverage from a global insurance policy that an affiliated company acquired in 2021 from insurers outside Canada, were required to self-assess and pay the 10% excise tax by 30 April 2022 to the CRA. Businesses need to remember that this tax obligation may also apply to insurance coverage purchased over electronic distribution platforms from insurers outside Canada.

Businesses may also face provincial sales tax (PST) liabilities and insurance premium taxes if they purchased insurance coverage from insurers that are not registered or licensed in certain provinces where they operate. Any related audits are performed by the appropriate provincial tax authorities.

Read a September 2022 report prepared by the KPMG member firm in Canada

 

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