The Canadian federal tax applicable to certain cross-border insurance premiums is due 30 April 2024.

This federal tax—imposed at a rate of 10% on insurance premiums—can apply with respect to:

• Businesses that have purchased insurance coverage from insurers outside Canada in 2023
• Businesses with insurance coverage from a global insurance policy that an affiliated company acquired in 2023 from insurers outside Canada

This federal tax is distinct from the provincial sales tax (PST) liabilities and insurance premium taxes that businesses may also face throughout the year if they have bought insurance coverage from insurers that are not licensed in certain provinces where they operate. Five provinces apply PST to certain insurance contracts—Quebec, Ontario, Manitoba, Saskatchewan, and Newfoundland and Labrador. Similar to the federal rules, a business that enters into contracts with insurers that are not registered in those provinces may be required to self-assess PST on the related insurance premiums. Otherwise, a business may face significant penalties for non-compliance. For example, Quebec can impose a penalty equal to 200% of the tax amount.

Businesses may also be liable for provincial insurance premium taxes or special levies as the insured person if the coverage is in a territory or a province where the insurer is not licensed (otherwise, the insurer is generally liable for these taxes). In some cases, these businesses must disclose the insurance purchase to the provincial regulatory authorities within a particular time period and pay a regulatory charge.

KPMG observation

Many types of insurance coverage may be subject to the 10% federal tax, PST and provincial insurance premium taxes, including cyber insurance and property insurance.

Businesses also need to be aware that insurance coverage purchased from insurers outside Canada over electronic distribution platforms may also be subject to such taxes.

Read an April 2024 report prepared by the KPMG member firm in Canada