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.

Benefit	Cost Tax Deductible to Employer?	Employer Contributions Taxable to Employee?	Employee Contributions Eligible for Tax Deductions or Credit?	Benefit Taxable When Received?
Accidental Death & Dismemberment	Yes	Yes	No	No
Group Life Insurance	Yes	Yes	No	No
Short-Term Disability	Yes	No	No	Yes/No*
Long-Term Disability	Yes	No	No	Yes/No*
Extended Health Care Plan	Yes	No*	Yes	No
Dental Plan	Yes	No*	Yes	No
Employee Assistance Plan	Yes	No	No	No
Registered Pension Plan	Yes	No	Yes	Yes
Registered Retirement Savings Plan	N/A	N/A	Yes	Yes
Deferred Profit-Sharing Plan	Yes	No	N/A	Yes
Canada/Quebec Pension Plan	Yes	No	Yes	Yes
Retirement Compensation Arrangement	Yes	No	Yes	Yes
WSIB Benefits	Yes	No	N/A	No
Employment Insurance	Yes	No	Yes	Yes
Provincial Health Plan	Yes	Yes	No	No

Benefit	Cost Tax Deductible to Employer?	Employer Contributions Taxable to Employee?
Accidental Death & Dismemberment	Yes	Yes
Group Life Insurance	Yes	Yes
Short-Term Disability	Yes	No
Long-Term Disability	Yes	No
Extended Health Care Plan	Yes	No*
Dental Plan	Yes	No*
Employee Assistance Plan	Yes	No
Registered Pension Plan	Yes	No
Registered Retirement Savings Plan	N/A	N/A
Deferred Profit-Sharing Plan	Yes	No
Canada/Quebec Pension Plan	Yes	No
Retirement Compensation Arrangement	Yes	No
WSIB Benefits	Yes	No
Employment Insurance	Yes	No
Provincial Health Plan	Yes	Yes

Benefit	Employee Contributions Eligible for Tax Deductions or Credit?	Benefit Taxable When Received?
Accidental Death & Dismemberment	No	No
Group Life Insurance	No	No
Short-Term Disability	No	Yes/No*
Long-Term Disability	No	Yes/No*
Extended Health Care Plan	Yes	No
Dental Plan	Yes	No
Employee Assistance Plan	No	No
Registered Pension Plan	Yes	Yes
Registered Retirement Savings Plan	Yes	Yes
Deferred Profit-Sharing Plan	N/A	Yes
Canada/Quebec Pension Plan	Yes	Yes
Retirement Compensation Arrangement	Yes	Yes
WSIB Benefits	N/A	No
Employment Insurance	Yes	Yes
Provincial Health Plan	No	No

* 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.
¹Provincial 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.
²Retail 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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