In Ontario, there is a requirement under the Retail Sales Tax Act that any business that offers a PHSP must pay a tax of 8% as well as a premium tax of 2%. These taxes exist only for Ontario businesses. HealthSmart collects these taxes as part of your fees paid to HealthSmart and remits them to the appropriate government departments.Should you research other PHSP providers you will often find no reference to these taxes. This is usually because these businesses are located in other provinces, which means they do not have to remit these taxes. However, the Act requires that if the business offering the PHSP is located in Ontario they are required to remit these taxes (requiring you to register for an RST account number), regardless of where the plan administrator is located. By registering with HealthSmart, your company will not have to register for these taxes.
Taxes for Self-employed Businesses
As an employer, the Canada Revenue Agency (CRA) has determined that contributions to a PHSP, as well as all related costs are fully deductible as a wage expense.
In order for the expense to be deductible, it must be “reasonable” given the situation. As well, the plan, in some fashion, must be offered to all employees of the company although they may opt out. While it is possible to offer varying levels of coverage to different levels of employees, there should be some basis for the scale of coverage provided.
Should you want more information on the tax implications of PHSPs, please contact us.