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Income Tax Regulations (C.R.C., c. 945)

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Regulations are current to 2022-09-22 and last amended on 2022-06-23. Previous Versions

PART XXIVInsurers (continued)

Designated Insurance Property

  •  (1) For the purposes of the definition designated insurance property in subsection 138(12) of the Act, designated insurance property of an insurer for a taxation year means property that is designated in accordance with subsections (2) to (7) for the year

    • (a) by the insurer in its return of income under Part I of the Act for the year; or

    • (b) if the Minister determines that the insurer has not made a designation that is in accordance with the prescribed rules found in this section, by the Minister.

Designation Rules

  • (2) For the purposes of subsection (1), an insurer, or the Minister if paragraph (1)(b) applies,

    • (a) shall designate for a taxation year investment property of the insurer for the year with a total value for the year equal to the amount, if any, by which the insurer’s mean Canadian reserve liabilities for the year in respect of its life insurance business in Canada exceeds the total of the insurer’s mean Canadian outstanding premiums and mean policy loans for the year in respect of that business (to the extent that the amount of the mean policy loans was not otherwise deducted in computing the insurer’s mean Canadian reserve liabilities for the year);

    • (b) shall designate for a taxation year investment property of the insurer for the year with a total value for the year equal to the amount, if any, by which the insurer’s mean Canadian reserve liabilities for the year in respect of its accident and sickness insurance business in Canada exceeds the insurer’s mean Canadian outstanding premiums for the year in respect of that business;

    • (c) shall designate for a taxation year in respect of the insurer’s insurance business in Canada (other than a life insurance business or an accident and sickness insurance business) investment property of the insurer for the year with a total value for the year equal to the amount, if any, by which the insurer’s mean Canadian reserve liabilities for the year in respect of that business exceeds 50% of the total of all amounts each of which is the amount, as at the end of the year or as at the end of its preceding taxation year, of a premium receivable or a deferred acquisition expense (to the extent that it is included in the insurer’s Canadian reserve liabilities as at the end of the year or preceding taxation year, as the case may be) of the insurer in respect of that business;

    • (d) if

      • (i) the insurer’s mean Canadian investment fund for a taxation year

      exceeds

      • (ii) the total value for the year of all property required to be designated under paragraph (a), (b) or (c) for the year,

      shall designate for the year, in respect of a particular insurance business that the insurer carries on in Canada, investment property of the insurer for the year with a total value for the year equal to that excess;

    • (e) for greater certainty, under each of paragraphs (a), (b), (c) and (d), shall designate for the taxation year investment property with a total value for the year equal to the amount, if any, determined under each of those paragraphs, and no investment property, or portion of investment property, designated for the year under any of paragraphs (a) to (d) may be designated for the year under any other paragraph; and

    • (f) may designate for a taxation year a portion of a particular investment property if the designation of the entire property would result in a designation of property with a total value for the year exceeding that required to be designated under paragraphs (a) to (d) for the year.

Order of Designation of Properties

  • (3) For the purpose of subsection (2), investment property of an insurer for a taxation year shall be designated for the year in respect of the insurer’s insurance businesses carried on by it in Canada in the following order:

    • (a) Canadian investment property of the insurer for the year owned by the insurer at the beginning of the year that was designated insurance property of the insurer for its preceding taxation year, except that such property shall be designated in the following order:

      • (i) real and depreciable property,

      • (ii) mortgages, hypothecs, agreements of sale and other forms of indebtedness in respect of real property situated in Canada or depreciable property situated in Canada or depreciable property leased to a person resident in Canada for use inside and outside of Canada, and

      • (iii) other property;

    • (b) investment property (other than Canadian investment property of the insurer for the year) owned by the insurer at the beginning of the year that was designated insurance property of the insurer for its preceding taxation year;

    • (c) Canadian investment property of the insurer for the year (other than property included in paragraph (a)) in the order set out in subparagraphs (a)(i) to (iii); and

    • (d) other investment property.

Equity Limit for the Year

  • (4) Notwithstanding subsections (2) and (3),

    • (a) the total value for the year of Canadian equity property of an insurer that may be designated in respect of the insurer’s insurance businesses for a taxation year shall not exceed the insurer’s equity limit for the year; and

    • (b) for a taxation year a portion of a particular Canadian equity property of an insurer may be designated if the designation of the entire property would result in a designation of Canadian equity property of the insurer for the year with a total value for the year exceeding the insurer’s equity limit for the year.

Exchanged Property

  • (5) For the purposes of subsection (3), property acquired by an insurer in a particular taxation year is deemed to be designated insurance property of the insurer in respect of a particular business of the insurer for its preceding taxation year and to have been owned by the insurer at the beginning of the particular taxation year if the property was acquired

    • (a) by reason of

      • (i) a transaction to which any of sections 51, 51.1, 85.1 and 86 of the Act applies,

      • (ii) a transaction in respect of which an election is made under subsection 85(1) or (2) of the Act,

      • (iii) an amalgamation (within the meaning assigned by subsection 87(1) of the Act), or (iv) a winding-up of a corporation to which subsection 88(1) of the Act applies, and

    • (b) as consideration for or in exchange for property of the insurer that was designated insurance property of the insurer in respect of the particular insurance business for its preceding taxation year.

Non-investment Property

  • (6) Non-segregated property owned by an insurer at any time in a taxation year (other than investment property of the insurer for the year) that is used or held by the insurer in the year in the course of carrying on an insurance business in Canada is deemed to be designated insurance property of the insurer for the year in respect of the business.

Policy Loan Excluded from Designated Property

  • (7) Notwithstanding any other provision in this Part, a policy loan payable to an insurer is not designated insurance property of the insurer.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/79-670, s. 4
  • SOR/2000-413, s. 2
  • 2010, c. 25, 82

 [Repealed, 2013, c. 34, s. 391]

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/79-670, s. 4
  • SOR/83-865, s. 7
  • SOR/90-661, s. 7
  • SOR/2009-222, s. 2
  • 2013, c. 34, s. 391

Branch Tax Elections

  •  (1) An election referred to in subsection 219(4) of the Act shall be made by a non-resident insurer in respect of a taxation year by filing, with its return of income required by subsection 150(1) of the Act to be filed for the year, a letter in duplicate stating

    • (a) the insurer elects under subsection 219(4) of the Act; and

    • (b) the amount the insurer elects to deduct under subsection 219(4) of the Act.

  • (2) Where a joint election referred to in subsection 219(5.2) of the Act is made by a non-resident insurer and a qualified related corporation (within the meaning assigned by subsection 219(8) of the Act) of the non-resident insurer in respect of a taxation year of the non-resident insurer, it shall be made by filing, with the non-resident insurer’s return of income required by subsection 150(1) of the Act to be filed for the year in which the event to which the election relates occurred, a letter in duplicate signed by an authorized officer of the non-resident insurer and an authorized officer of the qualified related corporation stating

    • (a) whether paragraphs 219(5.2)(a) and (b) of the Act apply; and

    • (b) the amount elected under subsection 219(5.2) of the Act.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/79-670, s. 4
  • SOR/81-632, s. 1
  • SOR/94-686, s. 79(F)
  • SOR/2000-413, s. 3

 [Repealed, 2013, c. 34, s. 392]

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/79-670, s. 4
  • 2013, c. 34, s. 392

 [Repealed, 2013, c. 34, s. 392]

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/78-89, s. 1
  • SOR/79-670, s. 4
  • SOR/80-419, s. 4
  • SOR/80-618, s. 6
  • SOR/81-632, s. 2
  • SOR/90-661, s. 8
  • SOR/92-681, s. 3
  • SOR/94-686, ss. 55, 62, 69(F), 78(F), 79(F)
  • SOR/2009-222, s. 3
  • 2013, c. 34, s. 392

 [Repealed, 2013, c. 34, s. 392]

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/79-670, s. 4. SOR/94-686, s. 55(F)
  • SOR/2000-413, s. 4
  • 2013, c. 34, s. 392

 [Repealed, 2013, c. 34, s. 392]

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/79-670, s. 4
  • SOR/88-165, s. 30(F)
  • SOR/94-686, s. 55(F)
  • 2013, c. 34, s. 392

 [Repealed, 2013, c. 34, s. 392]

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/79-670, s. 4
  • SOR/80-163, s. 1
  • SOR/88-165, s. 30(F)
  • SOR/94-686, s. 55(F)
  • 2013, c. 34, s. 392

 [Repealed, 2013, c. 34, s. 392]

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/79-670, s. 4
  • SOR/80-419, s. 5
  • SOR/90-661, s. 9
  • 2013, c. 34, s. 392

Prescribed Amount

 For the purpose of subsection 138(4.4) of the Act, the amount prescribed in respect of an insurer’s cost or capital cost, as the case may be, of a property for a period in a taxation year is the amount determined by the formula

[(A x B) x C / 365] - D

where

A
is the average annual rate of interest determined by reference to rates of interest prescribed in section 4301 for the months or portion thereof in the period;
B
is the amount, if any, by which, the average cost or average capital cost, as the case may be, of the property for the period exceeds the average amount of debt relating to the acquisition of the property outstanding during the period that bears a fair market interest rate and, for that purpose,
  • (a) the average cost or average capital cost, as the case may be, of a property is the total of

    • (i) the aggregate of all amounts each of which is the cost or capital cost, as the case may be, if any, immediately before the beginning of the period in respect of the property, and

    • (ii) the aggregate of all amounts each of which is the proportion of any expenditure incurred on any day in the period in respect of the cost or capital cost, as the case may be, of the property that

      • (A) the number of days from that day to the end of the period

      is of

      • (B) the number of days in the period, and

  • (b) the average amount of debt relating to the acquisition of a property is the amount, if any, by which the total of

    • (i) the aggregate of all amounts each of which is an indebtedness relating to the acquisition that was outstanding at the beginning of the period, and

    • (ii) the aggregate of all amounts each of which is the proportion of an indebtedness relating to the acquisition that was incurred on any day in the period that

      • (A) the number of days from that day to the end of the period

      is of

      • (B) the number of days in the period,

    exceeds

    • (iii) the aggregate of all amounts each of which is the proportion of an amount that was paid in respect of any indebtedness referred to in subparagraph (i) or (ii) on any day in the period (other than a payment of interest in respect thereof) that

      • (A) the number of days from that day to the end of the period

      is of

      • (B) the number of days in the period;

C
is the number of days in the period; and
D
is the income derived from the property in the period by the person or partnership that owned the property.
  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  •  SOR/90-661, s. 10
  • SOR/94-686, ss. 55(F), 78(F), 79(F)
  • SOR/2000-413, s. 5
  •  (1) Subject to subsection (2), the amount prescribed in respect of an insurer for a taxation year for the purposes of paragraph 138(9)(b) of the Act shall be the amount determined by the formula

    A - (B + B.1 + C)

    where

    A
    is the positive or negative amount, as the case may be, determined in respect of the insurer for the year under subsection (3);
    B
    is the positive or negative amount, as the case may be, determined in respect of the insurer for the year under subsection (4) in respect of the insurer’s investment property for the year that is designated insurance property of the insurer for the year;
    B.1
    is the positive or negative amount, as the case may be, determined in respect of the insurer for the year under subsection (4.1) in respect of property disposed of by the insurer in a taxation year for which it was designated insurance property of the insurer; and
    C
    is the amount claimed by the insurer for the year in respect of any balance of its cumulative excess account at the end of the year.
  • (2) Where an amount computed under subsection (1) in respect of an insurer is a negative amount, that amount shall be deemed to be nil.

  • (3) The positive or negative amount, as the case may be, determined under this subsection in respect of an insurer for a taxation year shall be

    • (a) if the value for the year of the insurer’s foreign investment property that is designated insurance property for the year is not greater than 5% of the amount of the insurer’s mean Canadian investment fund for the year and the insurer so elects in its return of income under Part I of the Act for the year, the amount determined by the formula

      {[((A + A.1) / B) x (C + J)] + [(D x F) / E]}

    or

    • (b) in any other case, the amount determined by the formula

      {[((A + A.1)/B) x C] + [(D x F)/E] + [((G + G.1)/H) x J]}

    where

    A
    is the positive or negative amount, as the case may be, determined in respect of the insurer for the year under subsection (4) in respect of Canadian investment property (other than Canadian equity property) owned by the insurer at any time in the year;
    A.1
    is the positive or negative amount, as the case may be, determined in respect of the insurer for the year under subsection (4.1) in respect of Canadian investment property (other than Canadian equity property) disposed of by the insurer in the year or a preceding taxation year;
    B
    is the total value for the year of Canadian investment property (other than Canadian equity property and any property described in paragraph (i) of the definition Canadian investment property in subsection 2400(1)) owned by the insurer at any time in the year;
    C
    is the total value for the year of the insurer’s Canadian investment property for the year (other than Canadian equity property and any property described in paragraph (i) of the definition Canadian investment property in subsection 2400(1)) that is designated insurance property of the insurer for the year;
    D
    is the positive or negative amount, as the case may be, determined in respect of the insurer for the year under subsection (4) in respect of Canadian investment property that is Canadian equity property owned by the insurer at any time in the year;
    E
    is the total value for the year of Canadian investment property that is Canadian equity property (other than any property described in paragraph (i) of the definition Canadian investment property in subsection 2400(1)) owned by the insurer at any time in the year;
    F
    is the total value for the year of the insurer’s Canadian investment property (other than any property described in paragraph (i) of the definition Canadian investment property in subsection 2400(1)) for the year that is Canadian equity property that is designated insurance property of the insurer for the year;
    G
    is the positive or negative amount, as the case may be, determined in respect of the insurer for the year under subsection (4) in respect of foreign investment property owned by the insurer at any time in the year;
    G.1
    is the positive or negative amount, as the case may be, determined in respect of the insurer for the year under subsection (4.1) in respect of foreign investment property disposed of by the insurer in the year or a preceding taxation year;
    H
    is the total value for the year of foreign investment property (other than any property described in paragraph (e) of the definition investment property in subsection 2400(1)) owned by the insurer at any time in the year; and
    J
    is the total value for the year of the insurer’s foreign investment property (other than any property described in paragraph (e) of the definition investment property in subsection 2400(1)) that is designated insurance property of the insurer for the year.
  • (4) The positive or negative amount, as the case may be, determined under this subsection in respect of an insurer for a taxation year in respect of property shall be the amount determined by the formula

    A - B

    where

    A
    is the total of the following amounts determined in respect of the property for the year, or that would be determined in respect of the property for the year if the property were designated insurance property of the insurer in respect of an insurance business in Canada for each taxation year in which the property was held by the insurer:
    • (a) the insurer’s gross investment revenue for the year (other than taxable dividends that were or would be deductible in computing the insurer’s taxable income for the year under section 112 or subsection 138(6) of the Act) derived from the property,

    • (b) [Repealed, SOR/2009-222, s. 4]

    • (c) all amounts that were or would be included in computing the insurer’s taxable capital gains for the year from the disposition of the property,

    • (c.1) all amounts that were or would be included under paragraph 142.4(5)(e) of the Act in respect of the property in computing the insurer’s income for the year,

    • (d) all amounts that were or would be included in computing the insurer’s income for the year as gains from the disposition of such of the property as is not capital property or a specified debt obligation (as defined in subsection 142.2(1) of the Act),

    • (e) all amounts that were or would be included in computing the insurer’s income for the year under subsection 13(1) of the Act in respect of the property,

    • (f) all amounts that were or would be included in computing the insurer’s income for the year under paragraph 12(1)(d), (d.1) or (i) of the Act in respect of the property,

    • (g) all amounts that were or would be included in computing the insurer’s income for the year under subsection 59(3.2) or (3.3) of the Act in respect of the property, and

    • (h) [Repealed, 2016, c. 12, s. 80]

    • (i) all other amounts that were or would be included in computing the insurer’s income for the year in respect of the property otherwise than because of subsection 142.4(4) of the Act; and

    B
    is the total of the following amounts determined in respect of the property for the year, or that would be determined in respect of the property for the year if the property were designated insurance property of the insurer in respect of an insurance business in Canada for each taxation year in which the property was held by the insurer:
    • (a) all amounts that were or would be included in computing the insurer’s allowable capital losses for the year from the disposition of the property,

    • (a.1) all amounts that were or would be deductible under paragraph 142.4(5)(f) of the Act in respect of the property in computing the insurer’s income for the year,

    • (b) all amounts that were or would be deductible in computing the insurer’s income for the year as losses from the disposition of such of the property as is not capital property or a specified debt obligation (as defined in subsection 142.2(1) of the Act),

    • (c) [Repealed, SOR/2009-222, s. 4]

    • (d) all amounts that were or would be deductible in computing the insurer’s income for the year under paragraph 20(1)(a) of the Act in respect of the capital cost of the property or under paragraphs 20(1)(c) and (d) of the Act in respect of interest paid or payable on borrowed money used to acquire the property,

    • (e) where any such property is rental property or leasing property (within the meaning assigned by subsections 1100(14) and (17), respectively), all amounts that were or would be deductible in computing the insurer’s income for the year in respect of expenses directly related to the earning of rental income derived from the property,

    • (f) all amounts that were or would be deductible by the insurer in computing the insurer’s income for the year under paragraph 20(1)(l), (l.1) or (p) of the Act as a reserve or bad debt in respect of the property,

    • (g) all amounts that were deducted or would be deductible in computing the insurer’s income for the year under section 66, 66.1, 66.2 or 66.4 of the Act in respect of the property, and

    • (h) [Repealed, 2016, c. 12, s. 80]

    • (i) all amounts that were or would be deductible in computing the insurer’s income for the year in respect of other expenses directly related to the earning of gross investment revenue derived from the property.

  • (4.1) The positive or negative amount, as the case may be, determined under this subsection in respect of an insurer for a taxation year in respect of property disposed of by the insurer in the year or a preceding taxation year is the amount determined by the formula

    A - B

    where

    A
    is the total of the amounts included under paragraphs 142.4(4)(a) and (c) of the Act in the insurer’s income for the year in respect of the property, or that would be so included if the property were designated insurance property of the insurer in respect of an insurance business in Canada for each taxation year in which it was held by the insurer; and
    B
    is the total of the amounts deductible under paragraphs 142.4(4)(b) and (d) of the Act in respect of the property in computing the insurer’s income for the year, or that would be so deductible if the property were designated insurance property of the insurer in respect of an insurance business in Canada for each taxation year in which it was held by the insurer.
  • (5) [Repealed, SOR/2009-222, s. 4]

  • (6) For the purposes of subsection (1), the balance of an insurer’s cumulative excess account at the end of a taxation year shall be determined as the amount, if any, by which

    • (a) the aggregate of all amounts each of which is a positive amount, if any, determined in respect of each of such of its seven immediately preceding taxation years that began after June 17, 1987 and ended after 1987 by the formula

      B - A

      where A and B are the amounts determined under subsection (1) in respect of the insurer for such immediately preceding taxation year,

    exceeds

    • (b) the aggregate of all amounts each of which is an amount claimed by the insurer under subsection (1) in respect of its cumulative excess account for a preceding taxation year that can be attributed to a positive amount determined under paragraph (a) for that year and, for the purpose of this paragraph, a positive amount determined in respect of a taxation year shall be deemed to have been claimed before a positive amount determined in respect of any subsequent taxation year.

  • (7) [Repealed, SOR/2000-413, s. 6]

  • (8) For the purposes of this section, foreign investment property of an insurer means investment property of the insurer (unless the insurer is a non-resident insurer and it is established by the insurer that the investment property is not effectively connected with its Canadian insurance businesses) that is not Canadian investment property of the insurer.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/90-661, s. 10
  • SOR/92-681, s. 3(F)
  • SOR/94-686, ss. 19(F), 69(F)
  • SOR/2000-413, s. 6
  • SOR/2005-393, s. 1
  • SOR/2009-222, s. 4
  • 2016, c. 12, s. 80
 
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