You don’t have to pay sales tax on auto insurance premiums in Ontario.
Ontarians pay taxes on many goods and services, including clothing, hotel accommodations and cars. Even car leases and repairs are taxable. But when it comes to auto insurance premiums, Ontarians don’t have to worry about HST or RST.
If you’re curious why auto insurance is treated differently, keep reading.
Is There Tax on Auto Insurance in Ontario?
You don’t have to pay sales tax on auto insurance premiums in Ontario. While you do have to pay tax on vehicle purchases, leases and repairs, you don’t have to pay sales tax to insure your vehicle.
Ontario charges Harmonized Sales Tax (HST) on many goods and services. HST combines the federal Goods and Services Tax with Ontario’s provincial portion of the tax. The current HST rate in Ontario is 13%.
Auto insurance is treated as an exempt financial service for GST/HST purposes. Ontario also exempts required automobile insurance from its Retail Sales Tax.
Here’s an overview of how taxes apply to common insurance and vehicle expenses:
| What you’re paying for | Which tax applies | Rate |
|---|---|---|
| Standard auto insurance premium | None: exempt from HST/GST and RST | 0% |
| Certain group or creditor insurance | Ontario RST | 8% |
| Used vehicle bought privately | Ontario RST, collected at ServiceOntario | 13% |
| Vehicle bought or leased from a dealer; repairs and parts | HST | 13% |
| Auto insurance claim settlement | Depends on what the payment compensates | Varies |
What About RST? Is It Applied to Auto Insurance?
RST still applies in certain circumstances, such as when a specified vehicle is purchased privately from someone who is not registered for GST/HST.
According to the Ontario Ministry of Finance, RST at a rate of 8% also applies to:
- Premiums paid under taxable insurance contracts
- Group insurance
- Certain contributions paid into funded benefit plans
- Certain payments made in respect of unfunded benefit plans and qualifying trusts
- Payments made into some insurance schemes or compensation funds established by law
However, automobile insurance required under Ontario law is exempt from RST.
In short, HST and RST should not be added to a standard Ontario auto insurance premium. If you notice a tax charge, ask your insurer or broker what product or fee it applies to.
Can You Be Exempted From Paying RST on a Vehicle?
Ontario provides several exemptions from RST on qualifying vehicle transfers. These may include situations where you:
- Receive a used vehicle as a gift from an eligible immediate family member
- Qualify as a foreign representative or First Nations individual
- Receive a vehicle through an estate
- Are a registered motor vehicle dealer acquiring the vehicle for resale
- Are moving to Ontario and bringing a vehicle you owned before the move
The conditions and documents required depend on the exemption. Ontario’s specified-vehicle guidance explains the current rules.
For a qualifying family gift, you must complete a Sworn Statement for a Family Gift of a Used Motor Vehicle and present it at a ServiceOntario centre.
Are Auto Insurance Claims Taxable?
Auto insurance payments for damage to a personal vehicle are generally not treated as income. The payment is intended to repair or replace what was damaged rather than provide additional income.
The treatment of an injury settlement depends on what the payment compensates. Personal-injury damages are generally not income, although interest and some income-related amounts may be treated differently.
Key Takeaways
Ontario does not charge HST or RST on standard auto insurance premiums. Taxes still apply to vehicle purchases, leases, repairs and certain other insurance products.
If you see tax on an insurance statement, ask what the charge applies to. It may relate to another product or taxable service rather than the auto insurance premium itself.
Read More: How Car Insurance Works in Ontario