Budget Implementation Act, 2017, No. 2 (S.C. 2017, c. 33)

Marginal note:Income — designated foreign insurance business

(2.1) If a life insurer resident in Canada has a designated foreign insurance business in a taxation year,

• (a) for the purposes of computing the life insurer’s income or loss from carrying on an insurance business in Canada for that taxation year, the life insurer’s insurance business carried on in Canada is deemed to include the insurance of the specified Canadian risks that are insured as part of the designated foreign insurance business;

• (b) if, in the immediately preceding taxation year, the designated foreign insurance business was not a designated foreign insurance business, for the purposes of paragraph (4)(a), subsection (9), the definition designated insurance property in subsection (12) and paragraphs 12(1)(d) to (e), the life insurer is deemed to have carried on the business in Canada in that immediately preceding year and to have claimed the maximum amounts to which it would have been entitled under paragraphs (3)(a) (other than under subparagraph (3)(a)(ii.1), (iii) or (v)), 20(1)(l) and (l.1) and 20(7)(c) in respect of those specified Canadian risks if that designated foreign insurance business had been a designated foreign insurance business in that immediately preceding year; and

• (c) for the purposes of subparagraph (3)(a)(ii.1) and subsection 20(22),

  • (i) the life insurer is deemed to have carried on the business in Canada in that immediately preceding year, and

  • (ii) the amounts, if any, that would have been prescribed in respect of the insurer for the purposes of paragraphs (4)(b) and 12(1)(e.1) for that immediately preceding year in respect of the insurance policies in respect of those specified Canadian risks are deemed to have been included in computing its income for that year.

Marginal note:Insurance swaps

(2.2) For the purposes of this section, one or more risks insured by a life insurer resident in Canada, as part of an insurance business carried on in a country other than Canada, that would not be specified Canadian risks if this Act were read without reference to this subsection, are deemed to be specified Canadian risks if those risks would be deemed to be specified Canadian risks because of paragraph 95(2)(a.21) if the life insurer were a foreign affiliate of a taxpayer.

Marginal note:Insurance swaps

(2.3) Subsection (2.4) applies in respect of one or more agreements or arrangements if

• (a) subsection (2.2) applies to deem one or more risks insured by a particular life insurer resident in Canada to be specified Canadian risks; and

• (b) those agreements or arrangements are in respect of risks described in paragraph (a) and have been entered into by any of the following (in subsection (2.4), referred to as an “agreeing party”):

  • (i) the particular life insurer,

  • (ii) another life insurer resident in Canada that does not deal at arm’s length with the particular life insurer,

  • (iii) a partnership of which a life insurer described in subparagraph (i) or (ii) is a member,

  • (iv) a foreign affiliate of either the particular life insurer or a person that does not deal at arm’s length with the particular life insurer, and

  • (v) a partnership of which a foreign affiliate described in subparagraph (iv) is a member.

Marginal note:Insurance swaps

(2.4) If this subsection applies in respect of one or more agreements or arrangements,

• (a) to the extent that activities performed in connection with those agreements or arrangements can reasonably be considered to be performed for the purpose of obtaining the result described in subparagraph 95(2)(a.21)(ii) (with any modifications that the circumstances require), those activities are deemed to be,

  • (i) if the agreeing party is a life insurer resident in Canada, or a partnership of which such a life insurer is a member, part of the life insurer’s insurance business carried on in Canada, and

  • (ii) if the agreeing party is a foreign affiliate of a taxpayer, or a partnership of which such an affiliate is a member, a separate business, other than an active business, carried on by the affiliate; and

• (b) any income from those activities (including income that pertains to or is incident to those activities) is deemed to be,

  • (i) if the agreeing party is a life insurer resident in Canada, income from the life insurer’s insurance business carried on in Canada, and

  • (ii) if the agreeing party is a foreign affiliate of a taxpayer, income from the business, other than an active business.

Marginal note:Ceding of Canadian risks

(2.5) Any income of a life insurer resident in Canada for a taxation year, from its insurance business carried on in a country other than Canada, in respect of the ceding of specified Canadian risks that would, if the life insurer were a foreign affiliate of a taxpayer, be included in computing the life insurer’s income from a business, other than an active business, for the taxation year because of subparagraph 95(2)(a.2)(iii), is to be included in computing the life insurer’s income or loss for that taxation year from its insurance business carried on in Canada, except to the extent it is already included because of subsection (2.1), (2.2) or (2.4).

Marginal note:Anti-avoidance

(2.6) For the purposes of this section,

• (a) a risk is deemed to be a specified Canadian risk that is insured as part of an insurance business carried on in Canada by a particular life insurer resident in Canada if

  • (i) the particular life insurer insured the risk as part of a transaction or series of transactions,

  • (ii) the risk would not be a specified Canadian risk if this Act were read without reference to this subsection, and

  • (iii) it can reasonably be concluded that one of the purposes of the transaction or series of transactions was to avoid

    • (A) having a designated foreign insurance business, or

    • (B) the application of any of subsections (2.1) to (2.5) to the risk; and

• (b) if one or more agreements or arrangements in respect of the risk have been entered into by any of the persons or partnerships described in subparagraphs (2.3)(b)(i) to (v) (in this paragraph, referred to as an “agreeing party”),

  • (i) any activities performed in connection with those agreements or arrangements are deemed to be

    • (A) if the agreeing party is a life insurer resident in Canada, or a partnership of which such a life insurer is a member, part of the life insurer’s insurance business carried on in Canada, and

    • (B) if the agreeing party is a foreign affiliate of a taxpayer, or a partnership of which such an affiliate is a member, a separate business, other than an active business, carried on by the affiliate, and

  • (ii) any income from those activities (including income that pertains to or is incident to those activities) is deemed to be,

    • (A) if the agreeing party is a life insurer resident in Canada, income from the life insurer’s insurance business carried on in Canada, and

    • (B) if the agreeing party is a foreign affiliate of a taxpayer, income from the business, other than an active business.

(d) for the purposes of paragraph (4)(a), subsection (9), the definition designated insurance property in subsection (12) and paragraphs 12(1)(d), (d.1) and (e), the insurer is deemed to have carried on the business in Canada in that preceding year and to have claimed the maximum amounts to which it would have been entitled under paragraphs (3)(a) (other than under subparagraph (3)(a)(ii.1), (iii) or (v)), 20(1)(l) and (l.1) and 20(7)(c) for that year,