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.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues: (a) Is sales tax included in the value of a taxable benefit received by an employee with respect to an employer-paid group term life insurance policy? (b) Is the taxable status of an employee-pay-all wage loss replacement plan affected when the employer pays the sales tax on the premium?
Position: (a) Yes. (b) No.
Reasons: (a) Part XXVII of the Regulations (b) IT-428
Randy Hewlett, B.Comm.
XXXXXXXXXX 613-957-8973
2003-002880
September 15, 2003
Dear XXXXXXXXXX:
Re: Impact Of Ontario Retail Sales Tax ("ORST") On Benefits
We are writing in response to your e-mail of July 10, 2003, wherein you requested our opinion on the above noted issue. We also acknowledge the additional information received in your e-mail of September 12, 2003.
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. However, we are prepared to offer the following comments on each of your concerns outlined below.
1. Is ORST included in the value of a taxable benefit received by an employee with respect to an employer-paid "group term life insurance" policy?
Where at any time in a taxation year an employee's life is insured under a "group term life insurance" policy, a benefit is included in the employee's income pursuant to subsection 6(4) of the Income Tax Act (the "Act"). The amount of the benefit is calculated in accordance with prescribed rules in Part XXVII of the Income Tax Regulations (the "Regulations"). General information on the calculation of the benefit is contained in the Employer's Guide: Taxable Benefits 2002-2003 (the "Guide"). As noted in the Guide, the amount of the taxable benefit must include "the total of all sales taxes and excise taxes that apply to the individual's insurance coverage".
2. Is the taxable status of an employee-pay-all wage loss replacement plan affected when the employer pays the ORST on the premium?
As noted in paragraph 17 of Interpretation Bulletin IT-428, Wage Loss Replacement Plans:
Where an employee-pay-all plan does, in fact, exist and it provides for the employer to pay the employee's premiums to the plan and to account for them in the manner of wages or salary, the result is as though the premiums had been withheld from the employee's wages or salary. That is, the plan maintains its status as an employee-pay-all plan if the plan provided for such an arrangement at the time the payment was made.
Where an employer pays the sales tax on the premium for an employee-pay-all plan, the taxable status of the plan for purposes of paragraph 6(1)(f) of the Act will not be affected, provided:
? The terms of a plan clearly establish that it is an employee-pay-all plan, and
? A taxable benefit is included in the employees' income under paragraph 6(1)(a) of the Act for the sales tax on the premium or the payments are out of the employees' after tax income.
The above publications can be found on our website at http://www.ccra-adrc.gc.ca.
We trust our comments will be of assistance to you.
Yours truly,
John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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