Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
XXXX
R. Lafontaine
Attention: XXXX
August 20, 1985
Dear Sirs:
Re: Taxable Benefits - 9% Quebec Sales Tax on Insurance
This is in reply to your letter of June 15, 1985, concerning the 9% Quebec sales tax that the Quebec government has recently imposed on insurance premiums. We apologize for the delay in replying to your letter.
In our view, generally, the tax treatment of an employer's payment of the sales tax on his share of premiums will be the same as the treatment given to the value of the benefit to which it applies. For example, if the benefit arising on the employer's contributions is a taxable benefit to an employee, the payment of the related sales tax by the employer will also be considered as a taxable benefit. In other cases where the benefit is a non-taxable benefit to an employee, the employer contributions and related sales tax will be considered as non-taxable benefits.
As you know, an employer's payment of premiums to an employees' group term life insurance policy in respect of coverage up to $25,000 is a non-taxable benefit by virtue of the exemption in paragraph 6(1)(a) of the Income Tax Act (the Act); therefore, payment by the employer of the related sales tax would be similarly non-taxable. However, subsection 6(4) of the Act defines as a taxable benefit to the employee "the premium in respect of any period in the year for any excess over $25,000 of the amount of life insurance in effect on the life of the taxpayer..." paid by the employer. It is our opinion that payment by the employer of the sales tax on this type of premium would be a taxable benefit to the employee.
Further, payment by the employer of the sales tax related to the employee's share of premiums would in all cases constitute a taxable benefit to the employee.
We trust these comments will be of assistance.
Yours truly,
for Director Non-Corporate Rulings Division
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© Sa Majesté la Reine du Chef du Canada, 1985
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