By Richard Giroux, Insurance Broker, Director, Courmark Inc.

In response to various member requests, I have looked into the question of insurance premiums for companies that are non-taxable due to provisions concerning "covered property" or services provided outside Quebec.

Based on our research, Quebec sales tax is payable on insurance only with respect to the portion of the premium payable by the insured attributable to risks that might occur in Quebec.

This portion of the premium must represent the proportion of the insured's business conducted in Quebec in relation to the total business volume. For calculation purposes, the data from the insured's last fiscal year must be used (section 518R4 of the Regulation respecting the Quebec sales tax).

Legal requirements*

''In accordance with section 518 of the Act respecting the Quebec sales tax, "where a damage insurance premium payable by a person who carries on business in Quebec is over $1,000 for the period of coverage and only part of the premium is attributable to a risk that might occur in Quebec", sections 518R1 to 518R4 of the Regulation respecting the Quebec sales tax apply when determining the taxable portion of the premium.

Under section 529 of the Act, "[a] person subject to the tax who pays an insurance premium part of which is not taxable shall certify what portion of the premium is taxable, to the person required to collect the tax".

The person required to collect the tax (e.g. the broker or insurer or some other person) does not always have the necessary information to determine the taxable portion of the premium. Therefore, the insured who pays the premium must certify the taxable portion.

Obtaining this certification is part of the legal mandate assigned to the person required to collect the tax and enables him/her to be released from liability if the taxable portion of the premium (as reported by the insured) is inaccurate.

However, the person required to collect the tax can never avoid liability with respect to the calculation of the tax or the calculation of the taxable portion of the premium if the necessary information is available to him/her.

This certification may take the form of written confirmation by the insured and must include all relevant information for the purposes of calculating the taxable portion of the premium.''

If you have any questions in this regard, please feel free to contact me!

*Source: Loi sur la taxe de vente du Québec