Division 4Life Insurance Policy Reserves

• 1404. (1) For the purpose of subparagraph 138(3)(a)(i) of the Act, there may be deducted, in computing a life insurer’s income from carrying on its life insurance business in Canada for a taxation year in respect of its life insurance policies in Canada, the amount the insurer claims, not exceeding

  • (a) the amount determined under subsection (3) in respect of the insurer for the year, where that amount is greater than nil; and

  • (b) nil, in any other case.

• (2) For the purpose of paragraph 138(4)(b) of the Act, the amount prescribed in respect of an insurer for a taxation year, in respect of its life insurance policies in Canada, is

  • (a) the absolute value of the amount determined under subsection (3) in respect of the insurer for the year, where that amount is less than nil; and

  • (b) nil, in any other case.

• (3) For the purposes of paragraphs (1)(a) and (2)(a), the amount determined under this subsection in respect of an insurer for a taxation year, in respect of its life insurance policies in Canada, is the amount, which may be positive or negative, determined by the formula

  A + B + C + D – M

  where

  A

  is the amount (except to the extent the amount is determined in respect of a claim, premium, dividend or refund in respect of which an amount is included in determining the value of B, C or D), in respect of the insurer’s life insurance policies in Canada, equal to the lesser of

  • (a) the total of the reported reserves of the insurer at the end of the year in respect of those policies, and

  • (b) the total of the policy liabilities of the insurer at the end of the year in respect of those policies;

  B

  is the amount, in respect of the insurer’s life insurance policies in Canada under which there may be claims incurred before the end of the year that have not been reported to the insurer before the end of the year, equal to 95% of the lesser of

  • (a) the total of the reported reserves of the insurer at the end of the year in respect of the possibility that there are such claims, and

  • (b) the total of the policy liabilities of the insurer at the end of the year in respect of the possibility that there are such claims;

  C

  is the total of all amounts each of which is the unearned portion at the end of the year of the premium paid by the policyholder for the policy, determined by apportioning the premium paid by the policyholder equally over the period to which that premium relates, where the policy is a group term life insurance policy that

  • (a) provides coverage for a period that does not exceed 12 months, and

  • (b) is a life insurance policy in Canada;

  D

  is the total of all amounts (other than an amount deductible under subparagraph 138(3)(a)(v) of the Act) each of which is the amount, which is the least of P, Q and R, in respect of a dividend, refund of premiums or refund of premium deposits provided for under the terms of a group life insurance policy that is a life insurance policy in Canada that will be

  • (a) used by the insurer to reduce or eliminate a future adverse claims experience under the policy,

  • (b) paid or unconditionally credited to the policyholder by the insurer, or

  • (c) applied in discharge, in whole or in part, of a liability of the policyholder to pay premiums to the insurer under the policy,

  where

  P

  is a reasonable amount as a reserve determined as at the end of the year in respect of the dividend, refund of premiums or refund of premium deposits provided for under the terms of the policy,

  Q

  is 25% of the amount of the premium under the terms of the policy for the 12-month period ending

  • (a) on the day the policy is terminated, if the policy is terminated in the year, and

  • (b) at the end of the year, in any other case, and

  R

  is the amount of the reported reserve of the insurer at the end of the year in respect of the dividend, refund of premiums or refund of premium deposits provided for under the terms of the policy; and

  M

  is the total of all amounts determined in respect of a life insurance policy in Canada each of which is

  • (a) an amount payable in respect of a policy loan under the policy, or

  • (b) interest that has accrued to the insurer to the end of the year in respect of a policy loan under the policy.

1405. For the purpose of subparagraph 138(3)(a)(ii) of the Act, there may be deducted, in computing a life insurer’s income for a taxation year, the amount it claims as a reserve in respect of an unpaid claim received by the insurer before the end of the year under a life insurance policy in Canada, not exceeding the lesser of

• (a) the reported reserve of the insurer at the end of the year in respect of the claim, and

• (b) the policy liability of the insurer at the end of the year in respect of the claim.

“life insurance policy in Canada”

“life insurance policy in Canada” has the same meaning as defined in subsection 138(12) of the Act. (police d’assurance-vie au Canada)

“life insurance policy”

“life insurance policy” has the same meaning as defined in subsection 138(12) of the Act. (police d’assurance-vie)

Transition Year

• (8) A computation that is required to be made under this Part in respect of an insurer’s taxation year that included September 30, 2006 and that is relevant to a computation (in this subsection referred to as the “transition year computation”) that is required to be made under this Part in respect of the insurer’s first taxation year that begins after that date shall, for the purposes only of the transition year computation, be made using the same definitions, rules and methodologies that are used in the transition year computation.

• 2600. (1) In applying the definition “income earned in the year in a province” in subsection 120(4) of the Act for an individual’s taxation year

  • (a) the prescribed rules referred to in that definition are the rules in this Part; and

  • (b) the amount determined under those prescribed rules means the total of all amounts each of which is the individual’s income earned in the taxation year in a particular province as determined under this Part.

Conditions

• 3505. (1) The following conditions are prescribed in respect of a donee for the purposes of paragraph 110.1(8)(e) of the Act:

  • (a) the donee has applied to the Minister for International Cooperation (or, if there is no such Minister, the Minister responsible for the Canadian International Development Agency) for a determination that the conditions described in this section have been met;

  • (b) medicines received by the donee for use in charitable activities outside Canada are

    • (i) delivered outside Canada by the donee for use in its charitable activities, or

    • (ii) transferred to another registered charity that would meet the conditions contained in this section if that registered charity were a donee described in subsection 110.1(8) of the Act;

  • (c) in the course of delivering medicines outside Canada for use in its charitable activities, the donee acts in a manner consistent with the principles and objectives of the inter-agency Guidelines for Drug Donations issued by the World Health Organization, as amended from time to time, (referred to in this section as “the WHO Guidelines”);

  • (d) the donee has sufficient expertise in delivering medicines for use in charitable activities carried on outside Canada;

  • (e) the donee carries on a program that includes delivering medicines for use in charitable activities carried on outside Canada and that is

    • (i) an international development assistance program, or

    • (ii) an international humanitarian assistance program, responding to situations of international humanitarian crisis (resulting from either natural disaster or complex emergency); and

  • (f) the donee has sufficient expertise to design, implement and monitor each program described in subparagraph (e)(i) or (ii) that it carries on, unless the donee has declared that it will not deliver medicines in that program.

• (2) Without limiting the application of the WHO Guidelines, for the purposes of paragraph (1)(c), a donee does not act in a manner consistent with the principles and objectives of those guidelines if the donee’s directors, trustees, officers or like officials have not

  • (a) approved a policy and procedural framework, under which the donee is required to act in a manner consistent with the WHO Guidelines; and

  • (b) declared that the donee acts in compliance with that policy and procedural framework.

• (3) A donee is considered not to have sufficient expertise for the purpose of a program to which paragraph (1)(d) or (e) applies if

  • (a) the program does not address the specific and differentiated needs, interests and vulnerabilities of affected women and men, girls and boys;

  • (b) the program does not incorporate, in the design of projects under the program, consideration for environmental effects of those projects; or

  • (c) the donee does not have policies and practices for the design, implementation and monitoring of the program.

• (4) The Minister referred to in subsection (1) may

  • (a) rely on any information or evidence in making a determination under subsection (1); and

  • (b) require the donee to provide any other information or evidence that that Minister considers relevant and sufficient for the purpose of this section.