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: Must the insurer from whom a settlement annuity is purchased, be a federally licensed insurer?
Position: Not a requirement in the Income Tax Act
Reasons: The business activities which may or may not be undertaken by an insurance corporation is governed by the legislation of the jurisdiction in which the insurer is licensed and in which the insurer intends to conduct the business activities.
XXXXXXXXXX 2005-011471
Alison Campbell
February 15, 2005
Dear XXXXXXXXXX:
Re: Structured Settlements
This is in reply to your letter of February 1, 2005, wherein you enquired whether there is any requirement for a life insurance company underwriting structured settlements in Canada to be federally licensed.
Insurance corporations in Canada may be federally licensed or they may obtain provincial licenses in those provincial jurisdictions in which they wish to carry on their insurance businesses. You should refer to the either the federal Insurance Company Act, or the relevant provincial insurance acts, to determine whether a particular insurer may carry on a particular business activity. You may also wish to consult with the appropriate federal or provincial insurance regulators as to whether licensed insurer may carry on a particular business activity. The Income Tax Act does not govern the business activities that may or may not be undertaken by an insurance company.
The Canada Revenue Agency's position as to the circumstances in which structured settlement payments received by a claimant will not be taxable to the claimant are set out in Interpretation Bulletin IT-365R2 "Damages, Settlements and Similar Receipts". The position is not dependent upon the insurer, from whom the casualty insurer purchases the annuity, being federally licensed rather than provincially licensed.
We trust that the above comments will be of assistance to you.
Yours truly,
F. Lee Workman
Manager
Financial Institutions Section
Income Tax Rulings Directorate
Policy and Planning Branch
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, 2005
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, 2005