Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: If a taxpayer can establish that a foreign-issued annuity contract is a prescribed annuity contract, and hence that the amount required by section 12.2 to be included in the taxpayer's income in respect of the contract is nil, does the Agency agree that the contract is excluded from the mark-to-market rules?
Position: We do not agree.
Reasons: There is no basis to argue that an amount equal to nil is included in the taxpayer's income under section 12.2 of the Act since this section does not apply with respect to prescribed annuity contracts.
CALU - Conference for Advanced Life Underwriting (2004)
Question 2
Foreign Investment Entity Rules and Foreign-Issued Annuity Contracts
The legislative proposals for the taxation of non-resident trusts and foreign investment entities that were tabled in the House of Commons on October 30, 2003 as a Notice of Ways and Means Motion include rules specifically applicable to foreign-issued insurance policies. If a policy is subject to these rules, the holder is required to apply the mark-to-market regime in determining income from the policy.
Certain insurance policies are excluded from these rules. By virtue of subparagraph 94.2(11)(c)(iii) of the proposed legislation, a life insurance policy is excluded for a particular taxation year if the holder can establish to the CRA's satisfaction that the holder has included the amount, if any, required by section 12.2 in computing the taxpayer's income for the year. Where a taxpayer holds an interest in a foreign-issued annuity contract that is a prescribed annuity contract, the accrual rules in section 12.2 do not apply to the annuity contract. Thus, no amount is required by section 12.2 to be included in the taxpayer's income.
Question:
If a taxpayer can establish that a foreign-issued annuity contract is a prescribed annuity contract, and hence that the amount required by section 12.2 to be included in the taxpayer's income in respect of the contract is nil, does the Agency agree that the contract is excluded from the mark-to-market rules?
Agency's Response
We do not agree. There is no basis to argue that an amount equal to nil is included in the taxpayer's income under section 12.2 of the Act since this section does not apply with respect to prescribed annuity contracts.
A foreign issued annuity contract, that is not a prescribed annuity contract, may be excluded from the mark-to-market rules under subparagraph 94.2(11)(c)(iii) of the proposed legislation, if the taxpayer can establish to the satisfaction of the Minister, that an amount has been included in the taxpayer's income under section 12.2 of the Act.
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 2004
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 2004
Email this Content