Health Spending Accounts (HSAs) work very similarly across Canada. In almost every province, HSA reimbursements are considered a non-taxable employee benefit and a fully tax-deductible business expense. The main provincial differences come down to taxes and a few minor practitioner eligibility differences.
This article breaks down the key HSA differences across provinces including Ontario, Alberta, British Columbia, Manitoba, Saskatchewan, Atlantic Canada, and Quebec.
How HSAs Are Taxed in Canada
For most provinces:
- Employee reimbursements are tax-free
- Employer contributions are tax-deductible
- Only GST or HST applies to the administration fee
The only major exception is Quebec, where HSAs are treated differently for tax purposes and Ontario were the provincial government applies 2 taxes on Health Spending Accounts
HSA Tax Differences by Province
Alberta, British Columbia, Manitoba, Saskatchewan & The Territories
For employee’s in Western Canada and the territories, HSAs are very straightforward from a tax perspective.
Only 5% GST applies to the administration fee. Claims themselves are not taxed provincially. This makes HSAs one of the most tax-efficient employee benefits available for businesses in:
- Alberta
- British Columbia
- Manitoba
- Saskatchewan
- Yukon
- Northwest Territories
- Nunavut
Example:
- $1,000 claim
- $70 admin fee
- $3.50 GST
- Total employer cost: $1,073.50
Ontario HSA Taxes
Ontario is one province with 2 additional taxes applied to Health Spending Accounts. These same taxes also apply to insurance-based health benefit plans so it’s just a cost of employee health benefits in Ontario. We collect and remit the taxes to the Ontario government. HSAs remain highly tax-efficient despite these additional taxes.
Ontario applies:
- 8% Retail Sales Tax (RST) on claims
- 2% Premium Tax (PPT) on claims and administration fees
- 13% HST on administration fees
Example:
- $1,000 claim
- $70 admin fee
- $80.00 RST
- $21.40 PPT
- $19.57 HST
- Total employer cost: $1,190.97
Atlantic Canada HSA Taxes
For employee’s in:
- New Brunswick
- Nova Scotia
- Prince Edward Island
- Newfoundland and Labrador
New Brunswick, PEI, and Newfoundland & Labrador: 15% HST on admin fees
Nova Scotia: 14% HST on admin fees
No tax on claim amounts.
Quebec Health Spending Accounts
Quebec has unique tax treatment for HSAs.
Unlike the rest of Canada, HSA reimbursements in Quebec are considered a taxable employee benefit at the provincial level. Quebec also applies taxes to both claims and administration fees.
Because the primary advantage of an HSA is receiving tax-free health reimbursements, some providers choose not to operate in Quebec. Coastal HSA currently does not offer HSAs in Quebec.
Eligible HSA Expenses Can Vary Slightly by Province
Health Spending Accounts generally follow CRA eligible medical expense rules across Canada. In most cases, eligible expenses are the same regardless of province.
One of the few notable exceptions is kinesiology.
For example:
- Kinesiology services are eligible medical expenses in Ontario when provided by a Registered Kinesiologist
- In other provinces, kinesiology does not qualify because the profession is not provincially regulated or recognized for CRA medical expense purposes
Outside of a few practitioner-specific situations like this, eligible HSA expenses are generally very consistent across Canada.
Do Provincial Differences Change How HSAs Work?
No. Despite some minor tax and practitioner differences, HSAs operate very similarly across Canada.
In nearly every province:
- Employers choose coverage limits
- Employees submit eligible medical expenses
- Businesses receive a tax deduction
- Employees receive tax-free reimbursements
This simplicity is one reason HSAs have become increasingly popular with Canadian small businesses, incorporated professionals, and owner-operators.
