Income Tax Regulations
1404 (1) For the purpose of subparagraph 138(3)(a)(i) of the Act, there may be deducted, in computing a life insurer’s income from carrying on its life insurance business in Canada for a taxation year in respect of its life insurance policies in Canada, the amount the insurer claims, not exceeding
(a) the amount determined under subsection (3) in respect of the insurer for the year, where that amount is greater than nil; and
(b) nil, in any other case.
(2) For the purpose of paragraph 138(4)(b) of the Act, the amount prescribed in respect of an insurer for a taxation year, in respect of its life insurance policies in Canada, is
(a) the absolute value of the amount determined under subsection (3) in respect of the insurer for the year, where that amount is less than nil; and
(b) nil, in any other case.
(3) For the purposes of paragraphs (1)(a) and (2)(a), the amount determined under this subsection in respect of an insurer for a taxation year, in respect of its life insurance policies in Canada, is the amount, which may be positive or negative, determined by the formula
A + B + C + D – M
where
- A
- is the amount (except to the extent the amount is determined in respect of a claim, premium, dividend or refund in respect of which an amount is included in determining the value of B, C or D), in respect of the insurer’s life insurance policies in Canada, equal to the lesser of
(a) the total of the reported reserves of the insurer at the end of the year in respect of those policies, and
(b) the total of the policy liabilities of the insurer at the end of the year in respect of those policies;
- B
- is the amount, in respect of the insurer’s life insurance policies in Canada under which there may be claims incurred before the end of the year that have not been reported to the insurer before the end of the year, equal to 95% of the lesser of
(a) the total of the reported reserves of the insurer at the end of the year in respect of the possibility that there are such claims, and
(b) the total of the policy liabilities of the insurer at the end of the year in respect of the possibility that there are such claims;
- C
- is the total of all amounts each of which is the unearned portion at the end of the year of the premium paid by the policyholder for the policy, determined by apportioning the premium paid by the policyholder equally over the period to which that premium relates, where the policy is a group term life insurance policy that
(a) provides coverage for a period that does not exceed 12 months, and
(b) is a life insurance policy in Canada;
- D
- is the total of all amounts (other than an amount deductible under subparagraph 138(3)(a)(v) of the Act) each of which is the amount, which is the least of P, Q and R, in respect of a dividend, refund of premiums or refund of premium deposits provided for under the terms of a group life insurance policy that is a life insurance policy in Canada that will be
(a) used by the insurer to reduce or eliminate a future adverse claims experience under the policy,
(b) paid or unconditionally credited to the policyholder by the insurer, or
(c) applied in discharge, in whole or in part, of a liability of the policyholder to pay premiums to the insurer under the policy,
where
- P
- is a reasonable amount as a reserve determined as at the end of the year in respect of the dividend, refund of premiums or refund of premium deposits provided for under the terms of the policy,
- Q
- is 25% of the amount of the premium under the terms of the policy for the 12-month period ending
(a) on the day the policy is terminated, if the policy is terminated in the year, and
(b) at the end of the year, in any other case, and
- R
- is the amount of the reported reserve of the insurer at the end of the year in respect of the dividend, refund of premiums or refund of premium deposits provided for under the terms of the policy; and
- M
- is the total of all amounts determined in respect of a life insurance policy in Canada each of which is
(a) an amount payable in respect of a policy loan under the policy, or
(b) interest that has accrued to the insurer to the end of the year in respect of a policy loan under the policy.
- [NOTE: Application provisions are not included in the consolidated text
- see relevant amending Acts and regulations.]
- SOR/79-425, s. 1
- SOR/80-419, s. 3
- SOR/83-865, s. 6
- SOR/84-948, s. 9
- SOR/88-165, ss. 9, 30(F)
- SOR/90-661, s. 5
- SOR/92-51, s. 8
- SOR/93-564, s. 1
- SOR/94-415, s. 7
- SOR/94-686, ss. 55(F), 56(F), 79(F)
- SOR/96-443, s. 2
- SOR/99-269, s. 6
- SOR/2002-123, ss. 3, 4
- 2009, c. 2, s. 100
- Date modified: