Taxes on insurance premiums in the Canadian province of Newfoundland and Labrador are set to increase sharply following the 2016 budget announcement.
In the 2016 budget released by the Minister of Finance for Newfoundland and Labrador earlier this month, an increase was announced in the rates of Insurance Companies Tax and a reintroduction of Retail Sales Tax on insurance premiums.
Insurance Companies Tax
Effective from 1 July 2016, Insurance Companies Tax will increase to 5% from 4%.
Insurance companies are required to pay the tax which is based on the premiums receivable during the year in respect of business transacted within the province of Newfoundland and Labrador. Certain classes of business are exempt from Insurance Companies Tax, most notably marine.
This increase is projected to generate an additional CAD16.9m in tax revenue for the province.
Retail Sales Tax
Effective from 1 July 2016, Retail Sales Tax will be reintroduced on property and casualty insurance premiums at a rate of 15%.
Before Retail Sales Tax on insurance premiums was abolished in 2008, it levied a tax of 15% on property and casualty insurance. It is expected that the tax will be reintroduced at the same rate and on the same basis.
This reintroduction is proposed to generate an additional CAD111m in tax revenue for the province.
Harmonised Sales Tax
It is also worth noting that effective from 1 July 2016, the rate of Harmonised Sales Tax will increase to 15% from 13% which may impact certain insurance companies’ business activities.