GUIDE FOR COMPLETING THE INSURANCE PREMIUM TAX RETURN - 1998 & SUBSEQUENT YEARS
THIS GUIDE IS NOT INTENDED TO REPLACE THE INSURANCE PREMIUM TAX ACT. IF THERE IS ANY CONFLICT BETWEEN THE WORDING USED IN THIS GUIDE AND THE LEGISLATION, THE LEGISLATION SHALL PREVAIL.
This guide provides information on the preparation of the Insurance Premium Tax Return ("IPT Return") for 1998 and subsequent calendar years.
The IPT Return must be completed by all insurers who are subject to tax under the Insurance Premium Tax Act.
If you require further information, contact the Income Taxation Branch, Ministry of Finance, PO Box 9444 Stn Prov Govt, Victoria BC V8W 9W8, Telephone 250 953-3082 or Fax 250 356-0434.
General Information
Instructions for filing an IPT Return
Completing the IPT Return
Section 1: Summary of IPT payable
Section 2: Calculation of Tax on Life and Health Premiums
GENERAL INFORMATION
The return must be filed by every taxable insurer which means:
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an insurer that has a business authorization under the Financial Institutions Act to carry on insurance business;
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a prescribed insurer, or
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a member of a prescribed class of insurers.
"Prescribed insurer" and "prescribed class of insurers" are described in Sections 2 and 3 of the Taxable Insurer Regulation.
Instructions for Filing an IPT Return
A signed copy of the IPT Return must be filed with the Minister of Finance, PO Box 9444 Stn Prov Govt, Victoria BC V8W 9W8, on or before March 31 of the subsequent calendar year.
The postmark date, or the date a courier delivers the return, will be accepted as the filing date.
The following items must accompany the IPT Return:
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where there is a balance of tax owing, a cheque made payable to the Minister of Finance;
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Captive insurance companies must submit Exhibit # 7 - Premium Schedule;
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Companies other than Captive Insurance Companies must submit exhibits detailing premiums written and dividends paid.
Payment of IPT Instalments and Final Remittance
A taxpayer whose tax payable for the preceding calendar year exceeded $ 25,000 is required to make instalments by June 15, September 15 and December 15 in each year, as follows:
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25% of the tax that the taxpayer paid in respect to the preceding year, or
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25% of the taxpayer's estimated tax payable for the current calendar year.
If a taxpayer elects to pay instalments using method (b) above, and the amount of each of those instalments is less than 25% of the taxpayer's tax payable for the current calendar year, the taxpayer will be charged interest on that difference, calculated from the instalment due date until the return due date.
The final balance of tax owing, net of any instalments paid, must be remitted by the corporation on or before the due date of the IPT Return
If a taxpayer fails to pay an instalment by the due date, the taxpayer must pay interest on the amount of the instalment calculated:
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from the instalment due date until payment is made, or
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if the instalment is not paid by the time a return is required to be filed, from the time the instalment became due until that date.
The legislation imposes a penalty equal to 5% of the amount of unpaid tax to a maximum of $ 500 for late-filed returns.
The following insurers are exempt:
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a fraternal benefit society; and,
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a purely mutual corporation in respect of any year in which at least 50% of the net premium income in British Columbia of the mutual corporation is derived from the insurance of farm property or wholly derived from the insurance of churches, schools or other religious or charitable institutions.
COMPLETING THE IPT RETURN
Corporation Profile
Account Number
The account number is preprinted on the Branch's form. If using a generic form or software generated form, enter the account number in the space provided.
Do not use a photocopy of a return which has been preprinted for another taxpayer or for another taxation year.
Taxpayer Requested Adjustment
Indicate if this is a Taxpayer Requested Adjustment to the return.
Name of Taxpayer
If the name and/or address of the taxpayer differs from the preprinted return, complete the change-of-address information in the space provided.
Computer Software Generated Form
If the return is prepared using a computer software program, a preprinted return will not be mailed to the taxpayer for the subsequent year. All computer software forms must be approved by the Branch.
Federal Business Number (BN)
Enter the taxpayer's federal business number.
Start/End of Taxation Year
Taxation year means a calendar year. Enter the start and end date of the applicable taxation year.
If the taxation year is different from the last taxation year, indicate the reason in the space provided.
First Year of Filing
Indicate if this is the taxpayer's first year of filing an IPT return; if not, indicate the taxation year of the last return filed.
Incorporation Date/Amalgamation Date
First-time filers should indicate the date of incorporation.
If this is the first return of an amalgamated corporation, enter the date of amalgamation and submit the articles/certificate of amalgamation.
A new account number will be assigned in both circumstances.
Final Taxation Year
Indicate if this is a final return. If yes, indicate the reason in the space provided.
Section 1: Summary of IPT Payable
This section summarizes the taxpayer's insurance premium tax liability and payments for the respective taxation year.
Box 1A: Tax payable on life and health premiums
Enter the tax payable on life and health premiums from Box 2G.
Box 1B: Tax payable on other premiums
Enter the tax payable on other premiums from Box 3K.
Box 1C: Insurance premium tax payable
Add the amounts in Box 1A and Box 1B to calculate the total insurance premium tax liability for the taxation year and enter the total in Box 1C.
Box 1D: Payment made by instalments
Enter the total of all instalments paid during the year.
Box 1E: Application of Prior Years' Overpayments
Enter the amount of the prior years' overpayment (if any) which is to be applied to the current year's tax liability.
Box 1F: Subtotal
Add the amounts in Box 1D and Box 1E and enter the total in Box 1F.
Box 1G: Balance
Enter the balance of tax owing or refundable after subtracting the total previous payments (Box 1F) from the amount of tax liability calculated (Box 1C).
If there is an amount refundable, enter as a negative.
Box 1H: If Payment Due
If there is a balance of tax owing (Box 1H is positive), enter the amount of the cheque attached to the return.
If the cheque has been sent under separate cover or is postdated, enter NIL.
Box 1I: If Overpayment
If there is a refund of tax owing (Box 1H is negative), indicate if this amount is to be either refunded or applied to the subsequent taxation year.
If neither box is completed, the overpayment will be refunded.
Section 2: Calculation of Tax on Life and Health Premiums
The tax payable under this part is 2% of the taxable insurer's net taxable premiums for the year received or receivable under contracts of life insurance, accident and sickness insurance and insurance that indemnifies or compensates for loss of salary or wages. (Box 2F x 2%).
Box 2A: Gross Premiums
Enter the gross premiums (including premiums under reinsurance contracts) received or receivable for life insurance, accident and sickness insurance, and insurance for loss of salary or wages.
Do not include premiums received as consideration for annuity contracts.
Box 2B: Premiums on reinsurance from licensed companies
Enter the gross premiums on reinsurance received or receivable from licensed companies.
If this deduction is being claimed, attach a schedule showing the licensed companies.
If this schedule is not attached, the deduction will be denied on initial assessment.
Box 2C: Premiums returned
Enter the amount of taxable premiums returned to policy holders by the insurer in the taxation year for life insurance, accident and sickness insurance, and insurance for loss of salary or wages.
Box 2D: Dividends to policy holders
Enter the amount of the cash value of dividends paid or credited in the taxation year by the insurer to policy holders under contracts of life insurance, accident and sickness insurance, and insurance for loss of salary or wages, in respect of persons resident in British Columbia.
Box 2E: Subtotal
Add the amounts in Box 2B, Box 2C and Box 2D and enter the total in Box 2E.
Box 2F: Net Taxable Premiums
Net taxable premiums, determined under this section, is the amount, if any, by which the insurer's total taxable premiums for the taxation year (Box 2A) exceeds the total of premiums on reinsurance from licensed companies, premiums returned and dividends to policy holders. (Box 2E).
Subtract Box 2E from Box 2A and enter the balance in Box 2F.
If net taxable premiums in Box 2F are negative, the branch will process a refund if the taxpayer shows that the tax was previously paid on such premiums.
Box 2G: Tax Payable on Life and Health Premiums
Tax payable on life and health premiums equals Box 2F x 2%.
Section 3: Calculation of Other Premiums
The tax payable under this part is 4% of the taxable insurer's net taxable premiums for the year received or receivable under contracts of insurance not included in the determination of tax payable on life and health premiums (Section 2).
Box 3A: Gross Premiums Received other than for life, accident, sickness and loss of salary or wages
Enter the gross premiums (including premiums under reinsurance contracts) received or receivable other than life insurance, accident and sickness insurance, and insurance for loss of salary and wages.
Do not include premiums received as consideration for annuity contracts.
Box 3B: Premiums on reinsurance from licensed companies
Enter the gross premiums on reinsurance received or receivable from licensed companies.
If this deduction is being claimed, attach a schedule showing the licensed companies.
If this schedule is not attached, the deduction will be denied on initial assessing.
Box 3C: Premiums returned
Enter the amount of taxable premiums returned to policy holders by the insurer in the taxation year other than for life insurance, accident and sickness insurance, and insurance for loss of salary or wages.
Box 3D: Dividends to policy holders
Enter the amount of the cash value of dividends paid or credited in the taxation year by the insurer to policy holders under contracts of insurance (other than life insurance, accident and sickness insurance, and insurance for loss of salary and wages) in respect of persons resident or property situated in British Columbia.
Box 3E: Marine premiums other than pleasure craft
Premiums received under a contract of marine insurance that is not pleasure craft insurance are not taxable premiums.
Enter the amount of gross premiums received or receivable under contracts of marine insurance other than pleasure craft insurance.
Box 3F: Subtotal
Add the amounts in Box 3B, Box 3C, Box 3D and Box 3E and enter the total in Box 3F.
Box 3G: Net taxable premiums
Net taxable premiums determined under this section, is the amount, if any, by which the insurer's total taxable premiums for the taxation year (Box 3A) exceeds the total of premiums on reinsurance from licensed companies, premiums returned, dividends to policy holders and marine premiums other than pleasure craft. (Box 3F).
Subtract Box 3F from Box 3A and enter the amount in Box 3G.
If net taxable premiums in Box 3G are negative, the branch will process a refund if the taxpayer shows that the tax was previously paid on such premiums.
Box 3H: Subtotal
Tax payable on other premiums before adjustment equals Box 3G x 4%.
Box 3J: Adjustment for 1998 taxation year
The rate of tax for premiums that were received or became receivable before April 1, 1998, under contracts of insurance, other than life insurance, accident and sickness insurance, insurance for loss of salary or wages and automobile insurance, is 3%.
Enter in 3I, the net taxable premiums, other than premiums under contracts for automobile insurance, included in Box 3G, that were received or became receivable before April 1, 1998.
Box 3K: Tax payable on other premiums
Tax payable on other premiums equals Box 3H minus Box 3J.
The certification box must be signed and dated by a duly authorized signing officer of the corporation.
Effective April 1, 1998, the insurance tax charging provisions of the Fire Services Act ("FSA") were repealed. That is, the 1% tax under the FSA continue to apply to premiums and assessments that were received or receivable on or before March 31, 1998.
The following instructions are only applicable for filing the Fire Services Tax Return ("FST return") for the 1998 taxation year. Note that the FST return has not been updated and that the FST return for 1998 taxation year is due on or before March 31, 1999.
Section 1: Calculation of Fire Services Tax Payable
Net taxable premiums are the net amounts determined under Section 1 that relate to premiums that were received or receivable from property insurance (excluding automobile insurance) on or before March 31, 1998.
Section 2: Payments
If there is a refund of tax owing (Box 2D exceeds Box 1D), the branch will apply the overpayment to the taxpayer's Insurance Premium Tax account provided that the taxpayer attaches a letter requesting that this be done