and Revenue Administration
||January 20, 2016
||Alberta Treasury Board and Finance, Tax and
|For more information:
CT-21R4 / January 2016
INSURANCE PREMIUMS TAX
NOTE: This information circular is intended to explain legislation and provide specific information. Every effort has been made to ensure the contents are accurate. However, if a discrepancy should occur in interpretation between this information circular and governing legislation, the legislation takes precedence.
This information circular discusses the Alberta tax assessed on insurance premiums
under the Alberta Corporate Tax Act (the Act). The topics discussed include:
OVERVIEW OF THE INSURANCE PREMIUMS TAX
- Part 9 of the Act imposes a tax on any person who undertakes, or agrees or offers for valuable consideration to undertake or effect, a contract of insurance in respect of business transacted in Alberta. An exception is made for fraternal societies incorporated for the non-profit purpose of making, with its members only, contracts of life, accident or sickness insurance. For simplicity, the term "insurer" is used in this circular to refer to a person subject to Part 9 tax.
- The tax is based on the amount of premiums receivable in the taxation year of the insurer on:
- property insurance: contracts covering property situated in
Alberta at the time the premiums became payable; and
- insurance other than property insurance: contracts with, or in respect of, persons who were resident in Alberta at the time the premiums become payable.
"Taxation year" means the fiscal year of the insurer.
- The tax is not payable for:
- consideration received by a life insurer for an annuity contract;
- marine insurance premiums,unless the premiums are for a pleasure craft;
- reinsurance premiums paid or credited to a
- premiums or a portion of a premium not retained by an insurer under a risk
- The amount of premiums receivable in the taxation year on which the tax is based is the
gross premiums receivable (except for amounts described in paragraph 3. during
the year, minus the sum of:
- premiums returned during the year, and
- the cash value of dividends paid or credited to policyholders during the year.
- For taxation years that begin after March 31, 2016, insurers must pay a tax of:
- 3 per cent of the amount of premiums under contracts of accident and sickness insurance, and life insurance contracts; and
- 4 per cent of the amount of premiums under any other contract of insurance.
- For taxation years that begin before April 1, 2016 and end after March 31, 2016, insurers must pay:
- in respect of contracts of accident and sickness insurance, and life insurance contracts, a tax of
- 2 per cent of the proportion of the amount of premiums receivable during the year that the number of days before April 1, 2016 bears to the number of days in the year, and
- 3 per cent of the proportion of the amount of premiums receivable during the year that the number of days after March 31, 2016 bears to the number of days in the year.
- in respect of other contracts of insurance, a tax of
- 3 per cent of the proportion of the amount of premiums receivable during the year that the number of days before April 1, 2016 bears to the number of days in the year, and
- 4 per cent of the proportion of the amount of premiums receivable during the year that the number of days after March 31, 2016 bears to the number of days in the year.
- Insurers required to pay the tax for a taxation year must file a return in prescribed form (form AT2095) with Tax and Revenue Administration (TRA) on or before the 75th day following the taxation year end. As explained on AT2095, the return is to be accompanied by a copy of the relevant pages of the P&C-1, P&C-2, LIFE-1 or LIFE-2, and any other relevant schedules from the respective annual return filed with the Superintendent of Insurance.
- The tax for a taxation year is due on or before the 75th day following the taxation year end. If a debit balance exists for any time after that date, interest compounded on a daily basis will be charged on that balance for the time it remains outstanding.
The following options are available for remitting payments to TRA. See our Making Payments page for more information.
- online using Electronic Payment through a financial institution. Electronic Payment is a convenient way to pay insurance premiums tax using the Government Tax Payment and Filing Service, which has been established at most financial institutions. Arrangements must be made with the financial institution before this service can be used. Once Electronic Payment has been set up, tax can be paid using the financial institution’s online banking platform. The effective date of receipt of the payment is the date that TRA's account is credited. The earliest possible effective date is the next business day. For more information on this option, contact the financial institution.
- online using a credit card. TRA does not directly offer the option of paying tax using a credit card. However, to pay by credit card you may be able to use a third-party service provider, such as Plastiq Inc. These providers will charge you a fee for their service. Transfers from third-party service providers will typically take place within two to three business days. However, additional delays may be encountered. The effective date of receipt of the payment is the date that TRA's account is credited. TRA may charge penalties or interest or both if the payment is late. For more information on this option, contact the third-party service provider.
- at many financial institutions in Canada, if accompanied by a remittance advice. The effective date of receipt of the payment is the business day stamped by the financial institution on the remittance advice.
- mailed, delivered by courier, or hand-delivered to TRA. Payments should be made payable to the Government of Alberta and accompanied by a remittance advice. The effective date of receipt of a mailed or delivered payment is the date it is actually received by TRA. Payments mailed or couriered to TRA should be sent with adequate lead time to ensure receipt on or before the due date. If hand-delivered, payments should be taken to TRA between the hours of 8:15 a.m. and 4:30 p.m., Monday to Friday, except government holidays.
The interest rates used are the same as those used for corporate income tax. Click here for the current interest rates.
- If an overpayment of tax occurs, the amount overpaid may be refunded or applied against another liability under the Act, including any outstanding balance in the insurer's income tax account
- Interest on an overpayment will be calculated from the latest of the:
- day the overpayment arose,
- 75th day following the taxation year end, or
- day on which a complete return for the year was filed
to the day the amount is refunded, repaid, or applied.
- If a return is not filed on time, a late-filing penalty is assessed in the amount of:
- 5 percent of the tax unpaid at the required filing date; plus
- 1 percent of the tax unpaid at the required filing date for each complete
month the return is late, to a maximum of twelve months.
- Although an insurer's return is considered to be filed on the day it is received by TRA, a late-filing penalty will not be assessed if a mailed return is received within five working days after the required filing date. A return sent by courier will not be assessed a late-filing penalty if it is received within one day of the required filing date. If hand-delivered returns are received anytime after the required filing date, they are considered late-filed.
- If the return is not filed in prescribed form or does not contain the prescribed information, the insurer will be asked to correct the situation. Any refund interest to which an insurer may be entitled will not begin until the required information has been submitted. If the situation is not corrected as required, the insurer may be subject to prosecution.
- An insurer may be liable for an administrative penalty if TRA finds that the filed return contains false statements or omissions under conditions that constitute gross negligence.
- On conviction, insurers who wilfully attempt to evade payment of tax are subject to fines. Individuals who are found by a court to be parties to such acts of evasion are also subject to fines and imprisonment.
- An insurer who fails to file a return as, and when, required is guilty of an offence and liable on conviction to a per-diem fine, set by the court, for each day of default. Similarly, the directors of the insurer may be charged for failure to file an insurer's return and would also be liable upon conviction to a per-diem fine.
- In assessing the insurance premiums tax, TRA is not bound by a return, or no return, filed. If circumstances warrant, TRA may issue an assessment different from a filed return (e.g., in the case of misrepresentation or fraud) or that reflects an estimate of tax payable determined without reference to a filed return (e.g., where previous requests to file have been ignored). Such an assessment is valid and binding and payment will be enforced.
- The following are normal periods during which a return may be reassessed:
- for an insurer that is a Canadian-controlled private corporation, within three years from the date of
mailing of the notice of assessment; or
- for all other insurers, within four years from the date of mailing of the notice
Reassessments issued beyond the normal reassessment period are limited to cases where the insurer has filed a waiver to waive the normal reassessment period, has made a misrepresentation that is attributable to neglect, carelessness or wilful default or has committed any fraud in the filing of the return or supplying information.
- An insurer who has questions or disagrees with an assessment or reassessment should first contact TRA to discuss the matter. If the situation cannot be resolved through contact with TRA, and the insurer still disagrees with the (re)assessment, the insurer may file a notice of objection within 90 days of the mailing of the notice of (re)assessment. The notice of objection must be sent by registered mail to:
TAX AND REVENUE ADMINISTRATION
ALBERTA TREASURY BOARD AND FINANCE
9811 109 ST
EDMONTON AB T5K 2L5
- The disposition of a notice of objection may be appealed to the Court of Queen's Bench of Alberta. If TRA consents, the insurer may waive its right to reconsideration by way of objection in favour of direct appeal to the court. Please refer to Information Circular CT-8, Objections and Appeals, for detailed information about the objection and appeal processes
- The Act requires insurers to keep their records and books of account in Alberta or at locations approved in writing by TRA. For additional information on the requirements concerning records and books, please refer to Information Circular CT-13, Records and Books.
- Further information and forms are available online.