ETSL36R Basic Facts – Insurance Premiums other than Marine

Excise Taxes and Other Levies Notice

February 2005

This notice replaces Canada Customs and Revenue Agency Notice ET/SL-0036 dated February 18, 1998.

Part I of the Excise Tax Act imposes a 10% tax on insurance premiums against a risk in Canada placed with "authorized" insurers through brokers or agents outside Canada or placed with "unauthorized" insurers.

"authorized" An authorized insurer is an insurer who is registered or authorized under the laws of Canada or of any province to transact the business of insurance.

"unauthorized" An unauthorized insurer is an insurer who is not authorized under the laws of Canada or of any province to transact the business of insurance.

What is exempt from tax?

The tax imposed by subsection 4(1) of the Excise Tax Act does not apply to the following contracts of insurance:

1. Contracts of life insurance, personal accident insurance, sickness insurance and insurance against marine risks are exempt from tax.

2. Contracts of insurance against nuclear risks to the extent that such insurance against nuclear risks is not, in the opinion of the Commissioner, available in Canada. This type of insurance is not subject to tax provided evidence has been submitted, which is satisfactory to the Canada Revenue Agency (CRA), that such insurance is not available in Canada.

3. Any contract of insurance which is not, in the opinion of the Commissioner, available in Canada.

Who is required to pay the tax?

Every person resident in Canada, including a corporation, who places insurance on risks in this country with an unauthorized insurer or an authorized insurer through a broker or agent outside Canada is required to file Form B243, Excise Tax Return – Insured, and account for tax at the rate of 10% on each taxable premium. If a broker or agent has paid the tax on behalf of the client or insured person, Form B243 must still be completed and filed by the client or insured person.

Tax is due and payable on or before April 30 in each year with respect to contracts of insurance entered into or renewed during the immediately preceding calendar year.

The CRA requires all brokers and agents who place or assist in placing contracts of insurance as described above to report the details of those contracts to the CRA no later than March 15 of each year on Form B241, Excise Tax Return – Broker. If a broker or agent is not contacted and has placed or assisted in placing contracts of insurance as described above, that broker or agent is required to contact the CRA to provide that information, pursuant to subsection 5(2) of the Excise Tax Act.

How to apply for an exemption from tax

Contracts of life insurance, personal accident insurance, sickness insurance and insurance against marine risks are not subject to tax. A B243 tax return is not required to be filed with the CRA in these cases.

Where a contract of insurance (including insurance against nuclear risk) would normally be subject to the 10% premium tax but is not available in Canada, an application for exemption may be made using Form E638, Application for Exemption from Tax on Insurance Premiums Imposed Under Part I of the Excise Tax Act, outlining the type of insurance purchased and the reasons it could not be obtained in Canada. The only reasons the CRA considers acceptable are: the particular class of insurance was not available from authorized insurers, or the lack of market capacity at that particular time for that class of insurance.

The form must also clearly indicate the contract number and amount, the period covered by the contract, the tax payable, the name and address of the broker/agent and of the insurance company. This form must be accompanied by a copy of the insurance policy and five letters of declination from authorized insurers. Letters issued by brokers are not acceptable. These documents must be sent to the following address:

Canada Revenue Agency 
Atlantic Tax Centre
275 Pope Rd
Summerside PE  C1N 6E7

Who can I contact?

Specialty Business Returns Section: 1‑877‑432‑5472 (calls from Canada or the United States), 1‑902‑432‑5472 (calls outside Canada and the United States), or 613‑221‑3073 (collect calls)

Excise and Specialty Tax Directorate: 1‑866‑330‑3304