ARCHIVED Services Pay Directive: 1985-088 (31)

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August 30, 1985

Ottawa, Canada
K1A 0S5

SUBJECT : Québec Sales Tax on Group Insurance Plan Premiums

1. PURPOSE

1.1 The purpose of this directive is to provide an explanation of the Québec Sales Tax (9%) that is to be levied on federal government employees'group insurance plan premiums.

2. BACKGROUND

2.1 On April 23, 1985, the Minister of Finance of Québec announced in his Budget Speech that a 9% retail sales tax would be applied to insurance premiums paid from April 24, 1985 onward. The Minister subsequently announced that transitional measures relating to the taxation of insurance premiums would be put into place in order to lessen administrative problems.

3. POLICY

3.1 The Québec Government has advised that it will impose a 9% retail sales tax on group insurance premiums received by insurance companies on or after June 16, 1985.

3.2 The sales tax is required of any person who resides in Québec and who pays a premium in respect of an insurance which deals with life, health or physical integrity. Please note that employees who work in Québec and reside in another province (e.g. Ontario) are not liable for the above-noted tax.

3.3 For federal government employees, the sales tax will be payable on all group insurance plans for which the government acts as the policy holder. The plans affected are Disability Insurance, Long Term Disability Insurance, Group Surgical Medical Insurance, Supplementary Death Benefit and Public Service Management Insurance. The 9% sales tax is also payable on the employer's share of the above-noted premiums. Additionally, the employer premium contributions for PSMIP in respect of life insurance coverage in excess of $25,000 are considered to be a taxable benefit to the employee. Consequently, the 9% sales tax in respect of these employer paid premiums is to be considered as a taxable benefit and will therefore be included on the employee's T4/Relevé 1 supplementary forms. Any insurances which are not employer sponsored (with the exception of Québec Blue Cross) will not be accommodated in SSC pay systems and therefore will not be calculated at source. Such companies will make their own arrangements to collect and remit the sales tax to Québec.

3.4 The Québec Government has also advised that the sales tax will apply to group insurance premiums paid by and on behalf of Treaty Indians residing on a reserve.

4. PROCEDURES/INSTRUCTIONS

4.1 Treasury Board will remit the employer's share of the tax until September 1985, at which time the pay systems will be programmed to automatically calculate the appropriate amount of the employer's contribution and to collect from employees an arrears deduction for the months of June, July and August 1985 which will be deducted as a one time amount prior to the end of the 1985 calendar year. The employees'premiums will be calculated and deducted commencing with the September 1985 pay cheques.

4.2 Departmental Personnel Offices must indicate to Paying Offices, in the remarks column of the pay input form, situations where the collection of arrears and/or the refund of the Québec Sales Tax is required. Such situations include a change in the province of residence, the commencement or cessation of a particular deduction etc.

5. INQUIRIES

5.1 Any queries on the foregoing should be addressed to Advisory Services - Pay (997-7292).

Original Signed by
T.W. Beckett

J.B. Murray
Director General
Compensation and Payments Services Directorate