Is There Tax on Auto Insurance in Ontario?
You don’t have to pay HST or GST on auto insurance in Ontario, but other provincial insurance taxes may still apply in certain cases. While you do have to pay taxes for vehicle purchases, leases, and repairs, you don’t have to pay taxes to insure your vehicle.
In Ontario, taxpayers are charged something called Harmonized Sales Tax (HST) for certain goods and services. It combines the province’s previous provincial sales tax (PST) – also known as Retail Sales Tax (RST) – with the federal Goods and Services Tax (GST). Since the transition to HST in 2010, Ontarians have only had to pay an additional 13% for certain goods, such as non-essential goods.
HST is not charged on auto insurance because insurance is classified as a financial service, and most financial services are exempt from GST/HST in Canada. Financial services, including the supply of auto insurance, are exempt from sales taxes in Ontario.
What About RST? Is It Deducted from Auto Insurance?
RST is still applied to select circumstances, such as specified privately purchased vehicles (motor vehicles that require a permit to drive on a highway, off-road vehicles, boats, and aircraft) from someone not registered for GST/HST, such as a non-resident.
As per the Ontario Ministry of Finance, RST is also deducted from:
- Premiums paid under taxable insurance contracts
- Group insurance
- Contributions paid into funded plans
- Benefits and certain payments made in respect of unfunded plans and qualifying trusts
- Payments made into insurance schemes or compensation funds established by statute
Retail Sales Tax (RST) is not applied to standard automobile insurance premiums, but it does apply to some other types of insurance products and benefit plans.
In conclusion, when it comes to car insurance, HST and RST should not be deducted. Always review your insurance policy and watch out for any sales tax deductions in your statement. Don’t hesitate to bring up any charges for HST/RST – or better yet, find a more reputable insurance provider!
Can You Be Exempted From Paying RST?
According to the Finance Ministry, you can be exempted from paying RST if you:
- Receive a vehicle from a family member as a gift
- Are a qualifying foreign representative/official or Status Indian
- Receive a vehicle as part of an estate bequest
- Are a registered motor vehicle dealer with a valid Ontario Motor Vehicle Industry Council number that is acquiring a vehicle for resale purposes
- Are relocating your home to Ontario and you are bringing in a vehicle you purchased before you moved
Are Auto Insurance Claims Taxable?
Auto insurance claims are usually tax-exempt.
If an insurance company gives you a settlement for any injuries or lost income/lost future earnings following a car accident, you don’t have to worry about paying taxes for this. This is because personal injury claims are considered pain and suffering compensation, which the Canada Revenue Agency (CRA) does not recognize as income.
Key Advice from MyChoice
- Review your insurance statement carefully. Auto insurance premiums in Ontario should not include HST or GST, so any unexpected charges should be clarified with your insurer.
- Ask your insurer about your policy breakdown. Understanding how your premium is calculated can help you identify unnecessary fees or charges. We provide a detailed breakdown of what’s included in your car insurance premium in Ontario.
- Compare quotes from multiple insurers. Even though insurance itself isn’t taxed, premiums can vary widely depending on the insurer, vehicle, and driving history.