Manitoba Retail Sales Tax (RST) on insurance premiums - now effective July 15, 2012

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As we reported in a May Focus Update, the Manitoba budget released at that time proposed the application of the Manitoba Retail Sales Tax (RST) of 7% to certain prescribed insurance premiums (specifically group life and group creditor life insurance), beginning July 2012. 

Since then, the scope of the application of the RST changed to include other group insurance premiums shown in the table below. There has been extensive industry consultation with the Manitoba government on this topic. For more information, read the Canadian Health and Life Insurance Association’s (CLHIA) news release, Manitoba’s new tax on life, health and disability insurance hurts consumers.

What’s different?

The original budget papers announced in April indicated that the Manitoba RST would be applied to premiums paid on group life insurance, but not group health insurance. However, on June 6, Bill 39 The Budget Implementation and Tax Statutes Amendment Act, 2012, was released and the scope of the legislative amendment has been broadened significantly. Now, effective July 15, 2012, the 7% RST tax rate will be applied to premiums for group life and some forms of group health insurance coverage, paid for or paid by plan members who reside in Manitoba, regardless of who is remitting the premium to the insurer. Refer to the table below for a summary of the products impacted.

This bill was passed on June 14, 2012, and is now law.

Taxable benefits

Non-taxable benefits (RST not applicable)

Group products, Association & Affinity

  • Life
  • Disability (short-term and long-term)
  • Critical illness
  • Accidental death & dismemberment

 

Group products, Association & Affinity

  • Health and dental
  • Long term care
  • Annuities

Creditor insurance

  • Life
  • All other non-life coverage

 

Next steps for our group plan sponsors:

Sun Life Financial has implemented the following immediate solutions for our plan sponsors.

For clients who receive a billing statement from Sun Life

1.      As an interim measure, Sun Life will make RST payments based on the estimated tax liability on your behalf, up until the month the Manitoba 7% RST officially appears on your billing statement. Once our bills reflect the new RST charge, Sun Life will also include a retroactive adjustment of the Manitoba RST for premiums payable on or after August 1, 2012, being the first premium due date after the effective date of the legislation.

2.      However, for plan sponsors who may choose to include the Manitoba 7% RST with their payment, the following steps will occur.

  • For each payment where Manitoba RST is included, the RST amount will have to be clearly identified on the remittance form sent with the payment. Note that in the absence of clearly identifying this payment, the amount received will be considered a payment of premium only.
  • Once our bills reflect the new RST charge, Sun Life will also include a retroactive RST adjustment, less any RST amounts previously identified and paid, for premiums payable on or after August 1, 2012, being the first premium due date after the effective date of the legislation.

We will provide you with any additional updates as they become available.

Questions?

If you have any questions about the Sun Life Wellness Institute or its findings, please contact your Please contact your Client Service Administrator at 1-877-786-7227.