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: Particular fact situation - is insurer carrying on an insurance business in Canada?
Position: No.
Reasons: See Q&A
2005-012603
CLHIA Conference - May 26, 2005
Question 6
Carrying on an Insurance Business - Section 115.2
An insurer incorporated and resident in a country other than Canada is not licensed or authorized to carry on its insurance business in Canada or a Province thereof. The insurer's only activities are "investment activities". It does not carry on any activities that in Canada would result in it being considered to carry on an insurance business in Canada for purposes of the Insurance Companies Act (Canada) or similar provincial legislation.
The insurer holds investments in Canada that are traded in Canada by it directly and on its behalf. These investments are properties used or held by the insurer in the course of carrying on its insurance business outside of Canada. The investment activities are such that, either under ordinary income tax principles or pursuant to section 253 of the Act, the insurer would be considered to be carrying on business in Canada.
Questions
(a) Would the CRA consider the business that the insurer is carrying on (or deemed to be carrying on ) in Canada an insurance business carried on in Canada by the insurer for purposes of the Act?
(b) If, pursuant to subsection 115.2(2), the insurer is considered to not be carrying on business in Canada for purposes of subsection 115(1) and Part XIV of the Act, would the CRA consider the insurer to be carrying on business in Canada for other purposes of the Act, such as section 150 and Parts I.3 and VI?
(c) If so, will the Department of Finance recommend an amendment to subsection 115.2(2) to extend the application of subsection 115.2(2) to those other provisions?
Agency's Response
(a) No. The business the insurer is carrying on (or deemed to be carrying on) would not be considered an insurance business carried on in Canada by the insurer for purposes of the Act. The insurer is neither licensed nor authorized to carry on an insurance business in Canada. It does not carry on any activities that in Canada would result in it being considered to carry on an insurance business for purposes of the Insurance Companies Act (Canada) or similar provincial legislation. Moreover, the investment activities in support of the insurance business outside of Canada would not result in the insurer being considered to carry on an insurance business of a particular class in the year for profit within the meaning of subsection 138(1) of the Act.
(b) Yes. Subsection 115.2(2) applies only for purposes of subsection 115(1) and Part XIV of the Act.
(c) Finance's reply.
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