Ontario HSAs: Why RST and Insurance Premium Tax Apply

In Ontario, HSAs are treated as benefit arrangements for provincial tax purposes, which means certain provincial taxes apply when a business reimburses medical expenses through an HSA.

This often surprises Ontario businesses, especially if a previous provider did not charge these amounts.

The absence of a charge in the past does not mean the tax did not apply.

It usually means it was not collected or disclosed, even though the underlying obligation still existed.

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How Ontario treats Health Spending Accounts

Ontario treats an HSA as a benefit arrangement for provincial tax purposes.

As a result, Ontario applies provincial tax to each claim made through the HSA.

For every HSA claim in Ontario, the following provincial taxes apply to the claim amount:

• Retail Sales Tax (RST): 8%
• Insurance Premium Tax (IPT): 2%

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Example: Ontario HSA tax impact

An employee submits an HSA claim for $1,000.

The claim is approved.

The business is invoiced for:

• Claim reimbursement: $1,000
• Ontario Retail Sales Tax (8%): $80
• Ontario Insurance Premium Tax (2%): $20

Total cost to the business: $1,100

The employee is reimbursed $1,000.

The additional $100 represents Ontario provincial tax paid by the business.

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“My previous provider never charged this”

This is one of the most common statements we hear from Ontario businesses.

Ontario applies Retail Sales Tax and Insurance Premium Tax to benefit arrangements operating in the province, including arrangements structured as Health Spending Accounts.

These taxes must be paid and remitted, regardless of how a plan was administered or billed.

If a previous provider did not charge Ontario RST or Insurance Premium Tax, that does not mean the taxes did not apply.

If an administrator did not collect Ontario RST or Insurance Premium Tax, the plan sponsor (you) was responsible for self-remitting those amounts.

If that did not occur, the taxes were not paid.

Guidance published by the Ontario Ministry of Finance on Retail Sales Tax and Insurance Premium Tax on benefits plans is clear on the practical outcome: the required provincial taxes must be paid and remitted.

In many arrangements, an administrator will collect and remit on the plan sponsor’s behalf.

If the administrator did not collect Ontario RST or Insurance Premium Tax, the plan sponsor was required to self-assess and remit those amounts directly.

So if you were not charged in the past, you were still responsible for ensuring those taxes were paid, either through self-remittance or by confirming they were remitted on your behalf.

That is the risk with non-compliant administration.

The obligation does not disappear because it was not surfaced at the time.

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What this means going forward

If your business uses an HSA in Ontario, provincial tax is part of the structure.

It is not situational, and it is not optional.

Each claim submitted through an Ontario HSA triggers 8% Retail Sales Tax and 2% Insurance Premium Tax, charged on top of the claim amount and paid by the business.

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Hiveworks applies Ontario’s rules exactly as they are written, charging and remitting the required provincial taxes on every claim. There is no retroactive clean-up, no uncertainty about whether amounts were remitted, and no risk of discovering years later that something was missed.

HSAs remain one of the most effective ways for Ontario businesses to cover health costs.

They just need to be run properly.

Hiveworks removes the uncertainty so you can move forward with confidence.