"Government of Newfoundland and Labrador eliminates tax on insurance premiums.
On April 22, 2008 the Government of Newfoundland and Labrador announced the elimination of the 15% tax on insurance premiums effective immediately and retroactive to January 1, 2008. As a member of the Insurance Brokers Association of Newfoundland and Labrador, Johnson Inc. has been lobbying for this cut for years and welcomes this announcement.
This announcement will affect policyholders differently depending on when you last purchased, renewed, or changed your policy.
We have compiled the following information to help you understand how the elimination of tax on insurance premiums will affect you.
Please note: The elimination of tax on insurance premiums is an initiative of the Government of Newfoundland and Labrador. In addition to our Frequently Asked Questions, we have provided you with a direct link to the related information, including the tax information bulletin, on the Province's web page.
Frequently Asked Questions
How did the tax work?
Prior to the government's announcement on April 22, 2008, when you purchased, renewed or changed your policy, you were charged the 15% Retail Sales Tax on insurance premiums. At that time, we remitted 100% of that tax to the Government of Newfoundland and Labrador, as per their requirements.How does the announcement change how the tax works?
Effective April 22, 2008, insurance companies, agents and brokers must no longer charge RST on insurance purchased or renewed on or after that date.How much will I get back?
The government has deemed the removal of insurance tax as a future tax benefit not a tax rebate.There are three categories of policies:
Category 1:
If you last purchased, renewed or changed (A change to your policy refers to any addition or deletion of coverage that would affect your premium ) your policy prior to January 1, 2008 then on your next renewal your policy will be issued without tax. Also any changes you make to your policy in the future will also be without tax.
Category 2:
If you have purchased, renewed, or changed (A change to your policy refers to any addition or deletion of coverage that would affect your premium ) your policy since January 1, 2008 and prior to the announcement on April 22, 2008, then the tax associated with these changes will be considered when calculating your tax adjustment. If the net effect results in an overpayment by you since January 1 then the eligible credit will be applied to the balance of your policy. If the net effect results in an underpayment amount, you will not be required to repay tax.
- If you are paying your premium using our automatic payroll or monthly bank deduction options then: The eligible credit will be automatically applied to the balance of your policy. Your deductions will be decreased accordingly. We will send you a letter giving you the exact details.
- If you paid your premium in full, the resulting eligible credit will automatically be sent to you in a refund cheque. We will send you a letter giving exact details.
- If you are paying your premium using our Time Account (8 payments) option, then: The resulting eligible credit will be applied to the balance of your policy. If this results in a credit balance, a refund cheque will be automatically sent to you. We will send you a letter giving the exact details.
Category 3:
If you have had any transactions since the announcement was made, any taxes charged will be adjusted. We "turned off the tax" as soon as possible after the April 22, 2008 announcement, but in some cases, such as renewals printed in advance, tax has been charged. This tax will be reversed in the next several weeks.
- If you paid your premium in full, the resulting eligible credit will automatically be sent to you in a refund cheque. We will send you a letter giving exact details.
- If you are paying your premium using our Time Account (equal instalments) option, then the resulting eligible credit will be applied to the balance of your policy. If this results in a credit balance, a refund cheque will be automatically sent to you. We will send you a letter giving the exact details.
- If you are paying your premium using our automatic payroll or monthly bank deduction options then the eligible credit will be automatically applied to the balance of your policy. Your deductions will be decreased accordingly. We will send you a letter giving you the exact details.
When will I get my adjustment?
We recognize that people are anxious to get back their eligible tax adjustments. We have been working with the government to clarify the administrative details and interpretation of the announcement. A notice will be sent to all affected policyholders in the next few weeks.My policy renewed in 2007 and I haven't made any changes to my policy since then. When will I see a tax adjustment?
Since your policy renewed prior to Jan 1 2008, your tax is still applicable as per the government's instructions. However, on your next renewal your policy will be issued without tax. Also, any changes you make to your policy in the future will be without tax.But I thought my monthly deduction included an amount for tax? Shouldn't I get that amount back?
When you purchased, renewed or changed your policy, you were charged the tax on insurance premiums. At that time, we remitted 100% of that tax to the Government of Newfoundland and Labrador, as per government requirements. However, Johnson Inc. offers a variety of payment plans to help customers manage their household expenses. The total tax owing on your policy was remitted on your behalf on the effective date of the transaction (new policy, change or renewal) even though you pay for it monthly.So if I cancel my policy, the new one won't have any tax, right?
That is correct; however, the Government of Newfoundland and Labrador has directed that any policy or coverage, cancelled since the announcement will be processed without any return of tax. Therefore, you will not receive any refund of tax if you cancel your policy and have it issued again.I renewed my policy in 2007; however, I made a change to it since January 1, 2008. What happens to the tax I paid?
We are not able to adjust the applicable tax charged on your renewal because it is prior to Jan. 1, 2008. However, all the changes you made in early 2008 will be included when calculating the tax adjustment.I purchased or renewed my policy since Jan 1, 2008, and I have also made a change to my policy since January 1, 2008.
Since your policy has an effective date after January 1, and your change occurred after January 1, both of these tax components will be considered when calculating the eligible credit.I recently renewed my policy. I paid my premium in full and was told I did not have to pay the tax at the time but I received a bill in the mail with the tax plus a service charge on it.
We are working to process all the tax adjustments on our policies that were effective since January 1, 2008 and hope to have yours completed within the next several weeks. In the meantime, until that is done, your account will reflect a balance. Please ignore the balance and rest assured that any service charge associated with the balance of the tax will be removed.
I still have more questions. Who can I contact about this?
For further information about your policy, you may contact Johnson's special tax inquiries hotline by calling 737-5959 or toll-free 1-866-944-4TAX (4829) or call your service supervisor.The elimination of insurance tax premiums is an initiative of the Government of Newfoundland and Labrador. The information we have presented on this page is meant to complement the government's Tax Information Bulletin (See link below). More information about this government initiative is available online at http://www.fin.gov.nl.ca/fin/taxonprem.html
Government of Newfoundland Labrador Resources
Tax Information Bulletin:
Retail Sales Tax on Insurance Premiums
http://www.fin.gov.nl.ca/fin/taxonprem.html
News release:
Province and Industry Working to Process Elimination of Insurance Tax
http://www.releases.gov.nl.ca/releases/2008/fin/0425n11.htm