Group Benefits Taxation

All about employee taxable benefits

Taxation of Employee Benefits

The following information below illustrates the income tax breakdown with regards to different employee taxable benefits and other deductibles in Canada.

BenefitCost Tax Deductible to Employer?Employer Contributions Taxable to Employee?Employee Contributions Eligible for Tax Deductions or Credit?Benefit Taxable When Received?
Accidental Death & DismembermentYesYesNoNo
Group Life InsuranceYesYesNoNo
Short-Term DisabilityYesNoNoYes/No*
Long-Term DisabilityYesNoNoYes/No*
Extended Health Care PlanYesNo*YesNo
Dental PlanYesNo*YesNo
Employee Assistance PlanYesNoNoNo
Registered Pension PlanYesNoYesYes
Registered Retirement Savings PlanN/AN/AYesYes
Deferred Profit-Sharing PlanYesNoN/AYes
Canada/Quebec Pension PlanYesNoYesYes
Retirement Compensation ArrangementYesNoYesYes
WSIB BenefitsYesNoN/ANo
Employment InsuranceYesNoYesYes
Provincial Health PlanYesYesNoNo
BenefitCost Tax Deductible to Employer?Employer Contributions Taxable to Employee?
Accidental Death & DismembermentYesYes
Group Life InsuranceYesYes
Short-Term DisabilityYesNo
Long-Term DisabilityYesNo
Extended Health Care PlanYesNo*
Dental PlanYesNo*
Employee Assistance PlanYesNo
Registered Pension PlanYesNo
Registered Retirement Savings PlanN/AN/A
Deferred Profit-Sharing PlanYesNo
Canada/Quebec Pension PlanYesNo
Retirement Compensation ArrangementYesNo
WSIB BenefitsYesNo
Employment InsuranceYesNo
Provincial Health PlanYesYes
BenefitEmployee Contributions Eligible for Tax Deductions or Credit?Benefit Taxable When Received?
Accidental Death & DismembermentNoNo
Group Life InsuranceNoNo
Short-Term DisabilityNoYes/No*
Long-Term DisabilityNoYes/No*
Extended Health Care PlanYesNo
Dental PlanYesNo
Employee Assistance PlanNoNo
Registered Pension PlanYesYes
Registered Retirement Savings PlanYesYes
Deferred Profit-Sharing PlanN/AYes
Canada/Quebec Pension PlanYesYes
Retirement Compensation ArrangementYesYes
WSIB BenefitsN/ANo
Employment InsuranceYesYes
Provincial Health PlanNoNo

* Yes for Quebec
** Yes, if any part of the short-term or long-term disability premium is paid by the employer. No, if the entire short-term or long-term disability premium is paid by the employee. Where the costs of the short-term or long-term disability plan are shared between employer and employee, the employee is entitled to receive benefits equal to his/her contributions on a non-taxable basis.

Harmonized Sales Tax (HST)

The federal government charges HST on the administration fees for ASO plans.

Provincial Premium Tax (PPT)

  • Ontario charges 2% Provincial Premium Tax on the cost of group life and health benefits.1
  • Alberta charges 3% Provincial Premium Tax on the cost of group life and health benefits.
  • Quebec charges 3.3% Provincial Premium Tax on the cost of group life and health benefits.1
  • Newfoundland and Labrador charge 5% Provincial Premium Tax on funded life and health benefits.
  • Nova Scotia charges 4% Provincial Premium Tax on funded life and health benefits.
  • 1 Provincial Premium Tax (PPT) is also charged on the PPT if it forms part of the premium billed by an insurer.

Provincial Retail Sales Tax (RST)

  • Ontario charges 8% Retail Sales Tax on group life and health benefits.2
  • Quebec charges 9% Retail Sales Tax on group life and health benefits.
  • 2 Retail Sales Tax is also charged on the Provincial Premium Tax if it forms part of the premium billed by an insurer.

Provincial Income Tax

The employer portion of health and dental premiums is included in the tax base for Quebec.

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