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Technical Tax Amendments Act, 2012 (S.C. 2013, c. 34)

Assented to 2013-06-26

  •  (1) Subsection 138(2) of the Act is replaced by the following:

    • Marginal note:Insurer’s income or loss

      (2) Notwithstanding any other provision of this Act,

      • (a) if a life insurer resident in Canada carries on an insurance business in Canada and in a country other than Canada in a taxation year, its income or loss for the year from carrying on an insurance business is the amount of its income or loss for the taxation year from carrying on the insurance business in Canada;

      • (b) if a life insurer resident in Canada carries on an insurance business in Canada and in a country other than Canada in a taxation year, for greater certainty,

        • (i) in computing the insurer’s income or loss for the taxation year from the insurance business carried on by it in Canada, no amount is to be included in respect of the insurer’s gross investment revenue for the taxation year derived from property used or held by it in the course of carrying on an insurance business that is not designated insurance property for the taxation year of the insurer, and

        • (ii) in computing the insurer’s taxable capital gains or allowable capital losses for the taxation year from dispositions of capital property (referred to in this subparagraph as “insurance business property”) that, at the time of the disposition, was used or held by the insurer in the course of carrying on an insurance business,

          • (A) there is to be included each taxable capital gain or allowable capital loss of the insurer for the taxation year from a disposition in the taxation year of an insurance business property that was a designated insurance property for the taxation year of the insurer, and

          • (B) there is not to be included any taxable capital gain or allowable capital loss of the insurer for the taxation year from a disposition in the taxation year of an insurance business property that was not a designated insurance property for the taxation year of the insurer;

      • (c) if a non-resident insurer carries on an insurance business in Canada in a taxation year, its income or loss for the taxation year from carrying on an insurance business is the amount of its income or loss for the taxation year from carrying on the insurance business in Canada; and

      • (d) if a non-resident insurer carries on an insurance business in Canada in a taxation year,

        • (i) in computing the non-resident insurer’s income or loss for the taxation year from the insurance business carried on by it in Canada, no amount is to be included in respect of the non-resident insurer’s gross investment revenue for the taxation year derived from property used or held by it in the course of carrying on an insurance business that is not designated insurance property for the taxation year of the non-resident insurer, and

        • (ii) in computing the non-resident insurer’s taxable capital gains or allowable capital losses for the taxation year from dispositions of capital property (referred to in this subparagraph as “insurance business property”) that, at the time of the disposition, was used or held by the non-resident insurer in the course of carrying on an insurance business,

          • (A) there is to be included each taxable capital gain or allowable capital loss of the non-resident insurer for the taxation year from a disposition in the taxation year of an insurance business property that was a designated insurance property for the taxation year of the non-resident insurer, and

          • (B) there is not to be included any taxable capital gain or allowable capital loss of the non-resident insurer for the taxation year from a disposition in the taxation year of an insurance business property that was not a designated insurance property for the taxation year of the non-resident insurer.

  • (2) Subparagraphs 138(3)(a)(iii) and (iv) of the Act are replaced by the following:

    • (iii) the amount determined by the following formula:

      A – B

      where

      A 
      is the total of policy dividends (except the portion paid out of segregated funds) that became payable by the insurer after its 1968 taxation year and before the end of the year under its participating life insurance policies, and
      B 
      is the total of amounts deductible under this subparagraph (including as determined under subsection (3.1) as it read in its application to the insurer’s last taxation year that began before November 2011) in computing its incomes for taxation years before the year, and
  • (3) The portion of subsection 138(3) of the Act after paragraph (a) is replaced by the following:

    • (b) the total of amounts each of which is a policy loan made by the insurer in the year and after 1977; and

    • (c) the amount of tax under Part XII.3 payable by the insurer in respect of its taxable Canadian life investment income for the year.

  • (4) Subsection 138(3.1) of the Act is repealed.

  • (5) Paragraph 138(4)(a) of the Act is replaced by the following:

    • (a) each amount deducted under paragraph (3)(a), other than under subparagraph (3)(a)(ii.1), (iii) or (v), in computing the insurer’s income for the preceding taxation year;

  • (6) Subsections 138(4.1) to (4.3) of the Act are repealed.

  • (7) Paragraph 138(11.5)(j) of the Act is replaced by the following:

    • (j) for the purpose of determining the income of the transferor and the transferee for their taxation years following their taxation years referred to in paragraph (h), amounts deducted by the transferor as reserves under paragraph (3)(a) (other than under subparagraph (3)(a)(ii.1), (iii) or (v)), paragraphs 20(1)(l) and (l.1) and 20(7)(c) of this Act and section 33 and paragraph 138(3)(c) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, in its taxation year referred to in paragraph (h) in respect of the transferred property referred to in paragraph (b) or the obligations referred to in paragraph (c) are deemed to have been deducted by the transferee, and not the transferor, for its taxation year referred to in paragraph (h),

  • (8) Paragraph 138(11.5)(k) of the Act is replaced by the following:

    • (k) for the purposes of this section, sections 12, 12.4, 20, 138.1, 140 and 142, paragraphs 142.4(4)(c) and (d), section 148 and Part XII.3, the transferee is, in its taxation years following its taxation year referred to in paragraph (h), deemed to be the same person as, and a continuation of, the transferor in respect of the business referred to in paragraph (a), the transferred property referred to in paragraph (b) and the obligations referred to in paragraph (c),

  • (9) Paragraph 138(11.5)(l) of the Act is replaced by the following:

    • (l) for the purposes of this subsection and subsections (11.7) and (11.9), the fair market value of consideration received by the transferor from the transferee in respect of the assumption or reinsurance of a particular obligation referred to in paragraph (c) is deemed to be the total of the amounts deducted by the transferor as a reserve under paragraph (3)(a) (other than under subparagraph (3)(a)(ii.1), (iii) or (v)) and paragraph 20(7)(c) in its taxation year referred to in paragraph (h) in respect of the particular obligation, and

  • (10) Paragraph 138(11.91)(d) of the Act is replaced by the following:

    • (d) for the purposes of paragraph (4)(a), subsection (9), the definition “designated insurance property” in subsection (12) and paragraphs 12(1)(d) and (e), the insurer is deemed to have carried on the business in Canada in that preceding year and to have claimed the maximum amounts to which it would have been entitled under paragraphs (3)(a) (other than under subparagraph (3)(a)(ii.1), (iii) or (v)), 20(1)(l) and (l.1) and 20(7)(c) for that year,

  • (11) Paragraph 138(11.91)(d) of the French version of the Act is repealed.

  • (12) Subsection 138(11.91) of the English version of the Act is amended by adding “and” at the end of paragraph (d.1), by striking out “and” at the end of paragraph (e) and by repealing paragraph (f).

  • (13) The portion of paragraph 138(11.94)(b) of the Act after subparagraph (ii) is replaced by the following:

    to a corporation resident in Canada (in this subsection referred to as the “transferee”) that is a qualified related corporation (within the meaning assigned by subsection 219(8)) of the transferor that, immediately after that time, began to carry on that insurance business in Canada for consideration that includes shares of the capital stock of the transferee,

  • (14) The definitions “1975 branch accounting election deficiency”,“1975-76 excess additional group term reserve”,“1975-76 excess capital cost allowance”, “1975-76 excess investment reserve”, “1975-76 excess policy dividend deduction”, “1975-76 excess policy dividend reserve” and “1975-76 excess policy reserves” in subsection 138(12) of the Act are repealed.

  • (15) The formula “(A + B + C) – (D + E + F + G + H)” in the definition “surplus funds derived from operations” in subsection 138(12) of the Act is replaced by the following:

    (A + B + C) – (D + E + F + G)

  • (16) The description of B in the definition “surplus funds derived from operations” in subsection 138(12) of the Act is replaced by the following:

    B 
    is the total of all amounts each of which is a portion of a non-capital loss that was deemed by subsection 111(7.1) as it read in its application to the 1976 taxation year to have been deductible in computing the insurer’s income for a taxation year that ended before 1977,
  • (17) The definition “surplus funds derived from operations” in subsection 138(12) of the Act is amended by adding “and” at the end of the description of F, by striking out “and” at the end of the description of G and by repealing the description of H.

  • (18) The definition “transition year” in subsection 138(12) of the Act is amended by striking out “and” at the end of paragraph (a), by adding “and” at the end of paragraph (b) and by adding the following after paragraph (b):

    • (c) in respect of the amendment to paragraph 1406(b) of the Income Tax Regulations effective as of the life insurer’s 2012 taxation year, the life insurer’s 2012 taxation year;

  • (19) Section 138 of the Act is amended by adding the following after subsection (25):

    • Marginal note:Policy reserve transition — application rules

      (26) In applying subsections (16), (17), (18) and (19) to a life insurer for a taxation year of the life insurer,

      • (a) if the application of one or more of those subsections is in respect of the amendment to paragraph 1406(b) of the Income Tax Regulations effective as of the life insurer’s 2012 taxation year, the life insurer’s reserve transition amount for its transition year in respect of that amendment is to be determined as though the description of A in the definition “reserve transition amount” in subsection (12) read as follows:

        A 
        is the maximum amount that the life insurer would be permitted to claim under subparagraph (3)(a)(i) (and that would be prescribed by section 1404 of the Income Tax Regulations for the purposes of subparagraph (3)(a)(i)) as a policy reserve for its base year in respect of its life insurance policies in Canada if paragraph 1406(b) of the Income Tax Regulations were read as it applies to the life insurer’s 2012 taxation year, and;
      • (b) if one or more of those subsections applies in the same taxation year in respect of both the amendment to paragraph 1406(b) of the Income Tax Regulations effective as of the life insurer’s 2012 taxation year, and the International Financial Reporting Standards adopted by the Accounting Standards Board and effective as of January 1, 2011, then, for the purposes of applying those subsections in respect of a transition year described by paragraph (b) of the definition “transition year” in subsection (12), the reference to “as it reads in respect of its transition year” in paragraph (b) of the description of A in the definition “reserve transition amount” in subsection (12) is to be read as a reference to “as it reads in respect of its transition year (determined without reference to the amendment to paragraph 1406(b) of the Income Tax Regulations effective as of the life insurer’s 2012 taxation year); and

      • (c) if the life insurer has more than one transition year for the same taxation year of the life insurer

        • (i) for each transition year, the computation of the reserve transition amount for the transition year, and the requirements to include, or rights to deduct, under any of those subsections an amount in respect of that reserve transition amount, shall be determined as if that transition year were the only transition year of the life insurer for that taxation year, and

        • (ii) for greater certainty, the references in subsections (16), (17), (18) and (19) to a transition year include each of those transition years.

  • (20) Subsections (1), (11) and (12) apply to taxation years that end after 1999.

  • (21) Subsections (2) to (10) and (14) to (17) apply to taxation years that begin after October 31, 2011.

  • (22) Subsection (13) applies to transfers made after October 2004.

  • (23) Subsections (18) and (19) apply to the 2012 and subsequent taxation years.

 
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