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.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
1.Is it possible for a foreign-issued life insurance policy of a non-resident policyholder to be a segregated fund policy under subsection 138.1 where the policyholder immigrates to Canada and retains the policy.
2.Is the reference to an insurer's reserves in subsection 138.1(1) restricted to reserves deductible under the Act.
Position TAKEN:
1. Yes.
2.No.
Reasons FOR POSITION TAKEN:
1.Whether criteria are met is a factual matter.
2. Generally, insurance reserves are not permitted under the Act for segregated fund policies.
950195
XXXXXXXXXX B.G. Dodd
Attention: XXXXXXXXXX
March 31, 1995
Dear Sirs:
Re: Non-Canadian Insurance Policies
We are writing in reply to your letter dated January 18, 1995. All references to statute are to the Income Tax Act (the "Act") or regulations thereunder (the "Regulations").
You refer to our April 6, 1994 reply to your previous letter which discussed the meaning of "exempt policy" (as that term is defined in subsection 12.2(11) of the Act and section 306 of the Regulations) in the context of a person who is a non-resident of Canada who has an interest in a life insurance policy from a non-Canadian insurance company which does not carry on business in Canada where the person subsequently becomes a Canadian resident and continues to hold the interest in the insurance policy (a "foreign policy"). You are now concerned with whether such a foreign policy could be a "segregated fund policy" as defined in subsection 138.1.
It is our view if, on a factual basis, the criteria set out in the preamble of subsection 138.1(1) are present, such a policy would be a segregated fund policy as referred to in paragraph 138.1(1)(a). With respect to the criteria concerning the insurer's reserves, it is our view that this is not restricted to reserves which are deductible under the Act.
While we hope the foregoing will be of assistance to you, please note that our comments are general in nature and should not be construed as binding in respect of any particular situation.
Yours truly,
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy & Legislation Branch
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