The province of Manitoba recently enacted legislation imposing a
7% retail sales tax ("RST") on premiums payable on
taxable insurance contracts, effective as of July 15, 2012 (the
"Effective Date"). The new RST is payable by every person
who enters into an insurance contract, if the person resides or
carries on business in Manitoba, or if the insurance contract
covers risks, perils or events in Manitoba. Taxable insurance
contracts generally include group insurance contracts, insurance
contracts on land, buildings or goods located in Manitoba and
liability and credit insurance1. Insurance
contracts that relate to risks that may occur both inside and
outside Manitoba will be taxable only on the portion that relates
to Manitoba. While the Manitoba rules are to a large extent similar
to those in Ontario, there are differences.
The RST will generally apply to both new and existing contracts.
For non-group contracts with a definite term, RST is payable on
premiums on new or renewal contracts that come into effect on or
after the Effective Date. For contracts with an indefinite term and
group contracts, RST is payable on premiums that are payable, and
that relate entirely to a coverage period beginning, on or after
the Effective Date.
The RST rules include registration, collection and remittance
requirements. Insurance companies that are authorized to sell
insurance in Manitoba must register, collect and remit RST on
taxable insurance contracts sold directly by them. If an insurance
company uses agents or brokers to sell contracts, and invoice and
collect premiums on its behalf, the agents and brokers must
register to collect and remit RST on those contracts. All other
vendors that sell taxable insurance contracts must register to
collect and remit RST, unless the insurance companies they deal
with have agreed to collect and remit the RST in respect of the
contracts they sell.
Administrative penalties of 10% of the non-remitted RST, plus
interest at "prime" plus 6% can be assessed for
non-compliance. However, it appears that Manitoba may likely permit
a grace period for insurers that encounter systems issues that
prevent compliance by the Effective Date and use their "best
efforts" to comply as soon as practicable.
Insurance companies, brokers and agents dealing with insureds or
risks in Manitoba should determine if they are subject to the new
RST regime. If they are, they should implement systems to ensure
1. In June 2012, the Manitoba Department of Finance
released "Information Bulletin No. 061 (The Retail Sales Tax
Act)" that outlines the types of taxable insurance contracts
that are subject to RST and how the RST should apply to new and
existing insurance contracts. The RST will not apply to premiums on
certain insurance policies including, individual life, disability
or critical illness insurance policies.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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