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: Whether a non-resident insurer that is not carrying on a business in Canada is subject to the requirements of section 116 in respect of a deemed disposition of a mark-to-market property that is a taxable Canadian property.
Position: Yes, but if the non-resident insurer has no final tax liability to Canada, the non-resident insurer may request a reduction to the required payment on account of tax.
Reasons: There is nothing in the definition of "excluded property" in subsection 116(6) that would exempt a non-resident insurer from having to fulfill the requirements of section 116 in respect of a deemed disposition of mark-to-market property.
2005-012604
CLHIA Conference - May 26, 2005
Question 3
Mark-to-Market Property and Taxable Canadian Property - Section 116 Requirements
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 is not carrying on a business in Canada nor is it deemed to be carrying on business in Canada for the purposes of the Act.
The insurer holds a share of a corporation resident in Canada. The share is not listed on a prescribed stock exchange. Therefore, the share is taxable Canadian property and is not excluded property within the meaning of subsection 116(6).
The insurer is an "insurance corporation" and a "restricted financial institution" within the meaning of subsection 248(1), and therefore a "financial institution" within the meaning of subsection 142.2(1). The insurer does not have a significant interest in the corporation. Consequently, the share is a mark-to-market property, as defined in subsection 142.2(1).
Questions
a) Does the CRA consider that the insurer must comply with the requirements of section 116 each year in respect of the disposition of the share that is deemed to occur by subsection 142.5(2) of the Act?
b) If so, will the Department of Finance recommend an amendment to ensure that the insurer will not be subject to the requirements of section 116 of the Act in respect of a deemed disposition of a mark-to-market property?
Responses
a) The requirements of section 116 apply where a non-resident person disposes of a taxable Canadian property other than "excluded property" as defined in subsection 116(6). There is nothing in the definition of "excluded property" that would exempt a non-resident person from having to fulfill the requirements of section 116 in respect of a deemed disposition of a mark-to-market property. If, in the circumstances described, the non-resident insurer has no final tax liability to Canada, the CRA may reduce the amount the insurer is required to pay under section 116 on account of tax. For this purpose, an explanation of the situation including all of the facts should be included with the notification under section 116.
b) Finance's reply.
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