Instalment payments for insurance premium taxes
If the amount of insurance premium tax you owed in the previous calendar year exceeded $25,000, you must make instalment payments based on the lesser of:
- 25% of the previous year’s tax, or
- 25% of the current year’s estimated tax
If you choose to pay instalments based on 25% of the current year’s estimated tax and the instalments are less than 25% of the actual tax, you will be charged interest on the difference.
However, as part of the B.C. COVID-19 Action Plan, interest won’t be charged from March 24 – September 30, 2020 on any outstanding balances. Interest will be charged again effective October 1, 2020. You’re still responsible for paying the outstanding balance.
Instalments are due during the tax year on:
- June 15
- September 15
- December 15
If your estimated insurance premium tax payable for the current year becomes less than your previous year’s actual tax payable, you may change your instalment payment amount part way through the current year.
See an example below of how you may calculate your instalment payments if you’re in this situation.
The remaining tax payable is due with the insurance premium tax return by March 31 of the following calendar year.
- Online using eTaxBC
- Through your bank or financial institution
- By mail or courier
- At a government office
If you aren’t required to make instalments, you must pay the entire balance of tax owing on or before the insurance premium tax return due date of March 31 of the following calendar year.
This is an example for how to calculate and pay your instalments if you change your instalment payment amount part way through the current year because your estimated tax payable for the current year is less than the previous year’s actual tax payable.
Your previous year’s actual tax payable was $40,000 and you made an instalment payment of $10,000 (25% of $40,000) for June 15.
However, on September 1, your business operations changed and you now estimate your current year’s tax to be $20,000 – a significant decrease from your previous year’s actual tax payable.
You decide to change the method for calculating instalments for the current year to now be based on your current year’s estimated tax payable instead of your previous year’s actual tax payable.
This means each instalment payment due for the current year is $5,000 (25% of $20,000), rather than $10,000.
Therefore, your breakdown of each instalment payment due for the current year is as follows:
June 15: $10,000, which you already paid based on your actual insurance premium tax payable for the previous year
September 15: $0, because you overpaid your June 15 instalment by $5,000
December 15: $5,000
Any remaining balance for the current year is payable when you file the tax return for the current year due by March 31 of the following year.
You may still be charged interest from the instalment due date if you underpay your tax instalment payments for the current year. Tax instalments are considered underpaid if they’re less than your actual tax payable for both the current year and the previous year.