Corporate-Owned Life Insurance for Ontario Business Owners

Ontario's 53.53% top personal rate and Estate Administration Tax are two reasons Ontario business owners look closely at corporate-owned life insurance.

Ontario business owners face a combined federal-provincial top personal marginal rate of 53.53%, and Ontario's Estate Administration Tax (EAT) applies when an estate certificate is applied for and issued. Corporate-owned life insurance (COLI) is one strategy Ontario owners use to manage the tax treatment of retained earnings and to plan around EAT exposure on personally held assets, though it does not eliminate EAT on the estate as a whole.

GOALD is licensed in Ontario and meets clients by appointment at partner and PPI boardrooms or by video — we are not a staffed retail branch or office.

Why Corporate-Owned Life Insurance Is Worth Evaluating for Ontario Business Owners

Ontario's Estate Administration Tax

EAT applies when an estate certificate is applied for and issued: $0 on the first $50,000, then $15 per $1,000 above that. On a $5M estate that requires probate, EAT is roughly $74,250. When a corporation, not an individual, owns the policy and receives the death benefit, those proceeds are not part of the personal estate for EAT purposes — but this does not eliminate EAT on the shareholder's shares or other personal estate assets.

No Blanket 8% Premium Tax on This Coverage

Ontario's Retail Sales Tax Act generally exempts non-group life and health insurance contracts on the life of an insured individual from RST — this is different from the 2% tax insurers pay on premiums generally, and from RST that can apply to certain group benefit arrangements. Confirm the specific treatment of your policy structure with your advisor.

GTA Business Valuations

The GTA hosts a large concentration of high-value private companies. As business values rise, the potential deemed disposition liability at death also rises, which is one reason owners plan ahead with a freeze and/or insurance funding.

Ontario Tax Landscape for Business Owners

Ontario's general provincial corporate rate is 11.5%. Ontario's lower small business provincial rate is scheduled to decrease from 3.2% to 2.2% effective July 1, 2026, so any combined small-business rate figure needs to specify the applicable tax year and period. Ontario's top personal marginal rate is 53.53%, beginning around $220,000 of taxable income. Passive investment income taxation depends on income type and is partly refundable through RDTOH, and the AAII grind on the federal small business deduction applies between $50,000 and $150,000 of AAII regardless of province.

  • ON General Provincial Rate: 11.5%
  • ON Small Business Rate: 3.2% → 2.2% (July 1, 2026)
  • ON Top Personal Rate: 53.53%
  • Estate Administration Tax: $0 to $50K; $15/$1,000 above

How GOALD Evaluates Corporate-Owned Life Insurance for Ontario Clients

  • EAT Exposure Review — We work with your lawyer to understand which assets in your estate would require probate and where EAT applies.
  • Premium and Tax-Type Review — We confirm with your advisor how RST rules apply to your specific policy structure, since group and non-group contracts are treated differently.
  • Industry-Specific Design — For Ontario's professional practices, technology companies, and real estate businesses, we tailor the policy illustration to your growth trajectory and cash flow.
  • Multi-Provincial Coordination — For Ontario businesses with operations elsewhere, we coordinate the corporate-owned life insurance structure across jurisdictions.

Related planning questions in Ontario

Frequently asked questions

How does corporate-owned life insurance work in Ontario?

Your Ontario corporation applies for and pays premiums on a permanent life insurance policy, generally from retained earnings. Growth inside a qualifying exempt policy generally accumulates without annual accrual taxation. On death, the proceeds are paid to the corporation and credit the CDA (proceeds less adjusted cost basis), potentially supporting a tax-free capital dividend where a valid election is made. Because the corporation, not the individual, owns and receives the policy, the proceeds are not part of the personal estate for EAT purposes.

Does Ontario charge retail sales tax on life insurance premiums?

Ontario's Retail Sales Tax Act generally exempts non-group life and health insurance contracts on the life of an insured individual from RST. This is distinct from the 2% tax insurers pay on premiums generally, and from RST rules that can apply to certain group benefit plans. Speak with your advisor about how this applies to your specific coverage.

How does corporate-owned life insurance interact with Ontario's Estate Administration Tax?

Ontario's EAT applies when an estate certificate is applied for and issued, generally $0 on the first $50,000 and $15 per $1,000 above. Proceeds paid to a corporation, rather than to an individual's estate, are not personal estate assets and are therefore not included in the EAT calculation on those proceeds. This does not, however, eliminate EAT on your shares or other personal estate assets.

Who can help evaluate corporate-owned life insurance in Ontario?

GOALD & Co works with Ontario business owners across the GTA and the province to evaluate corporate-owned life insurance in coordination with your accountant and lawyer.

Sources and tax notes

This page is general information only and is not tax or legal advice. Tax rates, thresholds, and rules described here depend on your specific facts and the applicable tax year, and are subject to change. Please coordinate with your own accountant and lawyer before implementing any strategy. Life insurance policy values shown or discussed are illustrated and are not guaranteed unless expressly stated as guaranteed in the insurance contract.

Last reviewed: August 2026