References to the Act are noted in this manner - s.5 (meaning refer to section 5).

Transcription

1 CT Insurance Premium Tax Return Ministry of Revenue July 2011 Guide The Corporations Tax Act This guide is provided for convenience only and is not a replacement for the legislation. For legislative accuracy please refer to the Corporations Tax Act (the Act). Failure to comply with the Act may result in: cancellation of the corporation s articles of incorporation, dissolution of the corporation, and forfeiture of the corporation s property to the Crown. References to the Act are noted in this manner - s.5 (meaning refer to section 5). References to the Ontario Ministry of Revenue Information or Interpretation Bulletins are noted - Inf.B.4003R1 or Int.B Corporate Tax Harmonization and Simplification For taxation years ending after December 31, 2008, corporations are required to file a harmonized T2 Corporation Income Tax Return with the Canada Revenue Agency (CRA). The harmonized tax return includes the following Ontario corporation taxes: corporate income tax (including tax credits), corporate minimum tax, capital tax, and special additional tax on life insurance corporations. However, the harmonized tax return does not include the Ontario Insurance Premium Tax (Premium Tax). For taxation years ending in 2009 and 2010, corporations subject to Premium Tax previously filed the Insurance Premium Tax Return with the Ontario Ministry of Revenue (the Ministry). For taxation years ending in 2011 and beyond, corporations will now file the new CT - Insurance Premium Tax Return (the tax return) with the Ministry. Submitting the CT - Insurance Premium Tax Return The tax return is to be filed by insurance corporations carrying on business through a permanent establishment in Ontario as well as by other entities liable to calculate, collect and remit Premium Tax under the Act. This includes incorporated and unincorporated entities such as: Administrators of funded and unfunded benefit plans, also referred to as Uninsured Benefit Arrangements. Ministry of Revenue Page 1 of 10

2 Insurance brokers placing insurance contracts with unlicensed insurers. Rules for Calculating Penalty The following penalties may be imposed for filing incomplete or late tax returns: CT Insurance Premium Tax Return Guide Reciprocal or inter-insurance exchanges within the meaning of the Insurance Act. A completed tax return and supporting documents must be submitted on or before the last day of the sixth month after the end of the taxation year. If the return is filed late, a penalty may be imposed. Starting with taxation years ending in 2009, taxpayers may use ONT-TAXS online to file, pay and view the tax return. ONT-TAXS online is the Ministry s secure, convenient and free online tax service for businesses and their representatives. It saves time, reduces paper and is available 24 hours a day, seven days a week. Getting started is fast and easy! Visit ontario.ca/revenue or call us at ONT-TAXS ( ). Supporting documents may be attached to the online tax return submission. Alternatively, a paper tax return and supporting documents may be sent to: Ministry of Revenue 33 King Street West PO Box 620 Oshawa ON L1H 8E9 A taxpayer having one late filed tax return may be subject to a penalty of 5 per cent of the deficiency in the tax account for the taxation year, plus an additional 1 per cent for each full month that the tax return is late, to a maximum of 12 months. A taxpayer having two late filed tax returns within four taxation years may be subject to a penalty on the latter return of 10 per cent plus an additional 2 per cent for each full month that the tax return is late, to a maximum of 20 months. For additional details on these penalties, refer to Inf.B.4004R, Penalties and Fines. The bulletin may be obtained by contacting the Ministry at ONT TAXS ( ) or by downloading a copy from our website at: ontario.ca/revenue Tax Payments Payments can be made using any of the following methods: using ONT-TAXS online at ontario.ca/revenue in person at select ServiceOntario locations by mail to 33 King St. West, PO Box 620 Oshawa ON L1H 8E9 in person at your Ontario financial institution Payments should be in Canadian funds and be made payable to the Minister of Finance. The Identification Number should be printed on the back of the cheque or money order. Ministry of Revenue Page 2 of 10

3 Application of Payments Payments and credits are first applied against any tax owing, second against any penalty owing, third against any interest owing, and fourth against any other amounts owing. Payment of Instalments Instalments are not required to be made by an insurance exchange, or under the following circumstances: The current taxation year is the first year filing. The Premium Tax for either the current taxation year or the previous taxation year is less than $2,000. Quarterly Instalments Instalments may be paid quarterly (every three months) if the Premium Tax for the current taxation year or the previous taxation year is equal to or greater than $2,000 and less than $10,000. Quarterly instalments should be calculated according to one of the following three methods: 1. 1/4 of the Premium Tax for the current taxation year; 2. 1/4 of the Premium Tax in the previous taxation year; or 3. for the first quarter of the taxation year, 1/4 of the Premium Tax from two years ago; and for the next three quarters, 1/3 of the difference between the previous taxation year s Premium Tax and the instalment paid for the first quarter. Monthly Instalments Instalments must be paid monthly if the Premium Tax for both the current taxation year and the previous taxation year are each $10,000 or more. Monthly instalments should be calculated according to one of the following three methods: 1. 1/12 of the Premium Tax for the current taxation year; 2. 1/12 of the Premium Tax in the previous taxation year; or 3. for the first two months, 1/12 of the Premium Tax from two years ago; and for the next 10 months, 1/10 of the difference between the previous taxation year s Premium Tax and the amount paid for the first two months. The use of the first method requires estimating the Premium Tax in the current taxation year. Where the instalments made using the first method are less than the actual tax payable, interest may be assessed on any deficiency in the instalment account. When calculating instalments for a previous year that has less than 365 days, the Premium Tax for that previous year must be grossed up to 365 days. Furthermore, if a previous year has less than 183 days, the Premium Tax for that previous year is the greater of the: Ministry of Revenue Page 3 of 10

4 Premium Tax for that previous year grossed up to 365 days, or Premium Tax for the most recent year that has more than 182 days grossed up to 365 days. A corporation that is the successor corporation of amalgamated corporations must use the total predecessor corporations Premium Tax in the computation of instalments. A corporation that is involved in a wind-up or rollover must include the subsidiaries Premium Tax or the transferor corporations Premium Tax in the calculation of instalments. Instalment Due Dates For taxation years that end on the last day of a month, instalments (monthly or quarterly) are due by the last day of the following month or quarter. For taxation years that do not end on the last day of a month, instalments are due by the same day of the following month or quarter. Balance of Tax Due CT Insurance Premium Tax Return Guide The difference between the current year Premium Tax and the amounts paid by instalments represents the balance of tax due. The balance of tax due must be paid within three months after the end of the taxation year, if your corporation was a Canadian-controlled private corporation (CCPC) throughout the taxation year and the taxable income in the prior year was less than or equal to $500,000. The taxable income is grossed up to 365 days if the prior year has less than 51 weeks. In all other cases, the balance of tax is due within two months after the end of your taxation year. Calculating Interest Interest is calculated and compounded daily for every day that there is a surplus or deficiency in a corporation s account. The corporation s account is divided, by period of time, into an instalment account and a tax account. The instalment account begins on the first day of the taxation year and ends on the day before the balance of tax due date. The tax account begins on the balance of tax due date which is two months (or three months for a CCPC) after the end of the taxation year. Interest on a surplus is allowed by the Ministry at three percentage points below the base rate, and interest on a deficiency is payable by the corporation at three percentage points above the base rate. The base rate approximates the average prime rate of the major Canadian banks. Along with unpaid Premium Tax, a deficiency in a corporation s account also includes interest, penalties and other unpaid amounts. If a tax return is not filed on time, no interest will be allowed on a surplus for the period from the day the tax return was required to be filed to the day the tax return is filed. Ministry of Revenue Page 4 of 10

5 Records Retention All records, documents and receipts pertaining to the tax return must be kept for seven years. For further information regarding records retention, please refer to the Tax Information Bulletin entitled Retention/Destruction of Books and Records. Copies are available at ontario.ca/revenue or by calling the Ministry at ONT-TAXS ( ). Identification Number The Identification Number is a unique number assigned by the Ministry to your account and noted on your return. Reference Number This is a unique number assigned by the Ministry to each tax return and accompanying schedule(s) issued to a taxpayer. When communicating with the Ministry, you must provide this unique Reference Number to identify a particular return/schedule(s), in addition to quoting your Identification Number. Change of Information Please notify the Ministry of any change in your name and address. Contact information is included at the end of this guide. When contacting the Ministry, be sure to use your Identification Number. Functional Currency Reporting A corporation may file its harmonized T2 Corporation Income Tax Return utilizing the functional currency reporting provisions in the federal Income Tax Act (the ITA). Where the CRA has accepted the functional currency reporting, the corporation may file its tax return with the Ministry utilizing the same functional currency reporting. The taxpayer should check the box entitled Functional Currency Election filed under s.261(3)(b) of the ITA, and complete the three boxes below by indicating the: functional currency used for the calculation, exchange rate used for the calculation, and exchange date used for the calculation. Complete lines 1 to 18 in the functional currency. The total Premium Tax on line 18 should be converted to Canadian currency using the relevant spot rate on the balance of tax due date and recorded on line 19. Any payments made should be recorded in Canadian currency on line 20. Ministry of Revenue Page 5 of 10

6 No Premium Tax Payable During this Reporting Period Corporations that meet the following criteria are not required to complete the tax return: the taxation year ends after December 31, 2008; the corporation is not an insurance corporation that has a permanent establishment in Ontario in the taxation year; and, the corporation s premium tax payable for the taxation year is nil. If you meet these criteria, check this box and file your nil tax return. Exemption Claimed Check this box if you are exempt from Premium Tax for any of the following reasons: marine insurance premiums (s.74(7)(a)); premiums payable under contracts of insurance issued on the premium note plan by mutual insurance corporations insuring agricultural and other non-hazardous risks, the sole business of which is carried on in Ontario (s.74(7)(b)); premiums payable to mutual insurance corporations insuring agricultural and other non-hazardous risks, which are parties to the agreement pursuant to s.169 of the Insurance Act, establishing the Fire Mutuals Guarantee Fund (s.74(7)(c)); fraternal societies with respect to contracts entered into prior to the first day of January, 1974, (s.74(7)(d)); mutual benefit societies, pension funds, employees mutual benefit societies and non-profit medical insurance associations (s.74(7)(e) and (f)). Election Filed Under s (3.1) of the CTA Please refer to the Uninsured Benefit Arrangements section of this guide. Apply credit to Future Reporting Period Check this box if you have a refund and want it applied to the next taxation year. Final Return Prior to Dissolution Check this box if the corporation is ceasing operations. Ministry of Revenue Page 6 of 10

7 Final Return Prior to Amalgamation Check this box if the corporation is a predecessor corporation that has undergone an amalgamation under section 87 of the Income Tax Act (ITA), or if the corporation is a subsidiary corporation that has been wound-up under section 88 of the ITA. Change of Control Check this box if the corporation experienced a change of control. If so, the corporation will have a deemed year end immediately before the change of control date. Transfer or Wind-up Check this box and submit a copy of the Ontario CT Schedule 44 if there has been a transfer (rollover) under subsection 85(1) or 85(2) of the ITA. Check this box and submit a copy of the Ontario CT Schedule 24 if the corporation is a parent corporation that has wound-up a subsidiary corporation during the current taxation year under section 88 of the ITA, or if the corporation is a successor corporation and this is the first taxation year after an amalgamation under section 87 of the ITA. Schedules 24 and 44 can be found on the Ministry website at ontario.ca/revenue under the Forms & Publications section. Insurance Placed with Unlicensed Insurers Premium Tax is payable by an Ontario corporation that enters into or pays premiums under an insurance contract with an unlicensed insurer. Premium Tax is also payable by an Ontario individual who, through an Ontario insurance broker, enters into or pays premiums under an insurance contract with an unlicensed insurer. An unlicensed insurer is an insurance corporation that is not licensed under the Insurance Act to carry on an insurance business in Ontario. The insurance contract is in respect of property situated in Ontario or a person who is resident in Ontario, but does not include life insurance. The premiums placed with unlicensed insurers should be reported on lines 10B, 10C and 10D as applicable, and the related Premium Tax reported on lines 13 to 16. Reciprocal or Inter-Insurance Exchanges Premium Tax is payable in respect of a reciprocal or inter-insurance exchange which is a group of subscribers exchanging reciprocal contracts of indemnity or insurance with each other through the same attorney. Ministry of Revenue Page 7 of 10

8 Groups of subscribers are typically organizations such as hospitals, school boards, municipalities or law firms which provide self-insurance to the members of the group. The premiums in respect of a reciprocal or inter-insurance exchange should be entered on lines 11C and 11D as applicable, and the related Premium Tax reported on lines 14 to 16. Insurance exchanges are not required to make instalment payments but must pay the Premium Tax by the balance of tax due date. Uninsured Benefit Arrangements An Ontario administrator of a benefit plan, commonly referred to as an Uninsured Benefit Arrangement (UBA) is required to collect and remit Premium Tax. This requirement includes unincorporated administrators. A UBA is a plan which gives protection against risk to individuals that could otherwise be obtained by taking out a contract of insurance. A UBA may be either funded or unfunded. A UBA is a funded benefit plan if the contributions paid into it are in excess of the amounts required for the payment of benefits foreseeable and payable within 30 days. Any other UBA is an unfunded benefit plan. Where a UBA is a funded benefit plan, Premium Tax is levied on the contributions paid into the plan by the planholder and the members. Where a UBA is an unfunded benefit plan, Premium Tax is levied on the benefits paid out of the plan. Furthermore, all UBAs are subject to Premium Tax on payments in respect of administration fees. Under certain criteria, a qualifying trust that is a UBA may elect to be deemed an unfunded benefit plan where it would otherwise be a funded benefit plan. The box Election filed under s.74.2 (3.1) of the CTA should be checked if the corporation is making this election. The Premium Tax on UBAs should be reported on line 17. Calculation of Premium Tax Payable In the calculation section, determine the total Premium Tax on lines 18 and 19, enter the payments made on line 20, and determine the net Premium Tax payable or refundable on line 21. If there is a refund and it should be applied to the next taxation year, check the box Apply credit to future reporting period. Ministry of Revenue Page 8 of 10

9 Certification If a paper tax return is filed, it must be signed and dated by an authorized signing officer. The information contained in the tax return must be true, correct and complete. The name, title and telephone number of the person signing the tax return must also be printed in the space provided. In order to discuss this tax return with a third party (such as your accountant or solicitor) the Ministry requires proper authorization. An Authorizing or Cancelling a Representative form must be completed and returned to the Ministry. This form is available on the Ministry s website at ontario.ca/revenue (enter webpage number 113 into the Find Page field at the bottom of the website). Voluntary Disclosure The Ministry encourages voluntary compliance with the statutes it administers. For more information, please obtain a copy of the Ministry s Voluntary Disclosure Bulletin by contacting the Ministry at ONT-TAXS ( ) or by downloading a copy from the Ministry s website at: ontario.ca/revenue Freedom of Information Questions regarding the collection of the information contained in the tax return should be directed to: Senior Manager, Account Management Client Services Branch Ministry of Revenue 33 King Street West, PO Box 627 Oshawa ON L1H 8H ONT- TAXS ( ) General Enquiries Address Website Ministry of Revenue ontario.ca/revenue 33 King Street West PO Box 627 Toll free Oshawa ON L1H 8H ONT-TAXS ( ) Hours of Service Teletypewriter (TTY) Monday to Friday :30 am to 5:00 pm Fax: Ministry of Revenue Page 9 of 10

10 Please retain this guide for future reference. If you require additional copies, refer to our website ontario.ca/revenue or contact us at ONT-TAXS ( ). Queen s Printer for Ontario 2011 ISBN (PDF) ISBN (HTML) ISBN (Print) Ministry of Revenue Page 10 of 10