Economic Action Plan 2014 Act, No. 2 (S.C. 2014, c. 39)
Full Document:
- HTMLFull Document: Economic Action Plan 2014 Act, No. 2 (Accessibility Buttons available) |
- PDFFull Document: Economic Action Plan 2014 Act, No. 2 [1843 KB]
Assented to 2014-12-16
PART 1AMENDMENTS TO THE INCOME TAX ACT AND A RELATED TEXT
C.R.C., c. 945Income Tax Regulations
82. (1) The portion of subsection 307(1) of the Regulations before paragraph (b) is replaced by the following:
307. (1) For the purposes of this Part and sections 12.2 and 148 of the Act, “accumulating fund”, at any particular time, means
(a) in respect of a taxpayer’s interest in an annuity contract (other than a contract issued by a life insurer), the amount that is the greater of
(i) the amount, if any, by which the cash surrender value of the taxpayer’s interest at that time exceeds the amount payable, if any, in respect of a loan outstanding at that time made under the contract in respect of the interest, and
(ii) the amount, if any, by which
(A) the present value at that time of future payments to be made out of the contract in respect of the taxpayer’s interest
exceeds
(B) the total of
(I) the present value at that time of future premiums to be paid under the contract in respect of the taxpayer’s interest, and
(II) the amount payable, if any, in respect of a loan outstanding at that time, made under the contract in respect of the taxpayer’s interest;
(2) The portion of subsection 307(1) of the Regulations after subparagraph (b)(ii) is replaced by the following:
is multiplied by
(iii) the taxpayer’s proportionate interest in the policy; and
(c) in respect of an exemption test policy,
(i) if the particular time is during the exemption test policy’s pay period, the amount determined by the formula
A × B/C
where
- A
- is the amount that would be determined under subparagraph (ii) in respect of the exemption test policy
(A) if the exemption test policy’s pay period is determined by subparagraph (b)(i) or (ii) of the definition “pay period” in section 310, on the first policy anniversary that is on or after the day on which the individual whose life is insured would, if the individual survived, attain the age of 105 years, as defined under the terms of the policy, and
(B) in any other case, on the exemption test policy’s policy anniversary represented by the adjectival form of the number of years in its pay period,
- B
- is the number of years since the exemption test policy was issued, and
- C
- is the number of years in the exemption test policy’s pay period,
(ii) if the particular time is after the exemption test policy’s pay period and before its endowment date, the amount that is the present value at the particular time of the future benefit on death under the exemption test policy, and
(iii) if the particular time is on or after the exemption test policy’s endowment date and the relevant life insurance policy is issued after 2016, the amount that is the benefit on death under the exemption test policy at the particular time.
(3) The portion of subsection 307(2) of the Regulations before subparagraph (a)(i) is replaced by the following:
(2) For the purposes of subsection (1), when computing the accumulating fund in respect of
(a) an interest described in paragraph (1)(a), the amounts determined under clauses (1)(a)(ii)(A) and (B) are to be computed using,
(4) Subparagraphs 307(2)(a)(i) and (ii) of the French version of the Regulations are replaced by the following:
(i) dans les cas où le taux d’intérêt relatif à une période qu’a utilisé l’émetteur au moment de l’émission du contrat pour en déterminer les modalités est inférieur à tout autre taux utilisé à cette fin pour une période subséquente, être calculées selon le taux simple qui, s’il avait été appliqué à chaque période, aurait donné les mêmes modalités,
(ii) dans les autres cas, être calculées selon les taux qu’a utilisés l’émetteur au moment de l’émission du contrat pour en déterminer les modalités;
(5) Paragraph 307(2)(b) of the Regulations is replaced by the following:
(b) an interest described in paragraph (1)(b) in respect of a life insurance policy issued before 2017 or an annuity contract, if an interest rate used for a period by a life insurer in computing the relevant amounts in paragraph 1403(1)(a) or (b) is determined under paragraph 1403(1)(c), (d) or (e), as the case may be, and that rate is less than an interest rate so determined for a subsequent period, the single rate that could, if it applied for each period, have been used in determining the premiums for the policy is to be used;
(6) The portion of paragraph 307(2)(c) of the Regulations before subparagraph (i) is replaced by the following:
(c) an exemption test policy issued in respect of a life insurance policy issued before 2017,
(7) The portion of subsection 307(2) of the Regulations after clause (c)(ii)(A) is replaced by the following:
(B) where, in respect of the life insurance policy, the particular period over which the amount determined under clause (B) of the description of A in subparagraph 1401(1)(c)(ii) does not extend to the exemption test policy’s endowment date, the weighted arithmetic mean of the interest rates used to determine the amount is to be used for the period that is after the particular period and before that date,
(iii) notwithstanding subparagraphs (i) and (ii), no rate of interest used for the purpose of determining the accumulating fund in respect of an exemption test policy issued in respect of the life insurance policy is to be less than
(A) if the life insurance policy is issued after April 1985, 4% per annum, and
(B) if the life insurance policy is issued before May 1985, 3% per annum, and
(iv) each amount of a benefit on death is to be determined net of any portion in respect of the benefit on death of the exemption test policy related to a segregated fund; and
(d) an exemption test policy issued in respect of a coverage under a life insurance policy issued after 2016,
(i) the rates of interest and mortality used and the age of the individual whose life is insured under the coverage are to be the same as those used in computing amounts under paragraph 1401(1)(c) in respect of the policy, and
(ii) each amount of a benefit on death is to be determined net of any portion in respect of the benefit on death of the exemption test policy related to a segregated fund.
(8) Subsections 307(3) and (4) of the Regulations are repealed.
(9) Subsection 307(5) of the Regulations is amended by adding “and” at the end of paragraph (a), by striking out “and” at the end of paragraph (b) and by repealing paragraph (c).
83. Subsections 308(1) and (1.1) of the Regulations are replaced by the following:
308. (1) For the purposes of subparagraph 20(1)(e.2)(ii) and paragraph (a) of the description of L in the definition “adjusted cost basis” in subsection 148(9) of the Act, the net cost of pure insurance for a year in respect of a taxpayer’s interest in a life insurance policy is
(a) if, determined at the end of the year, the policy was issued before 2017, the amount determined by the formula
A × (B – C)
where
- A
- is the probability, computed on the basis of the rates of mortality under the 1969–75 mortality tables of the Canadian Institute of Actuaries published in Volume XVI of the Proceedings of the Canadian Institute of Actuaries, or on the basis described in subsection (1.1), that an individual who has the same relevant characteristics as the individual whose life is insured will die in the year,
- B
- is the benefit on death in respect of the interest at the end of the year, and
- C
- is the accumulating fund (determined without regard to any amount payable in respect of the policy loan) in respect of the interest at the end of the year or the interest’s cash surrender value at the end of the year, depending on the method regularly followed by the life insurer in computing amounts under this subsection; and
(b) if, determined at the end of the year, the policy was issued after 2016, the total of all amounts each of which is an amount determined in respect of a coverage in respect of the interest by the formula
A × (B – C)
where
- A
- is the probability, computed on the basis of the rates of mortality determined in accordance with paragraph 1401(4)(b), or on the basis described in subsection (1.2), that an individual whose life is insured under the coverage will die in the year,
- B
- is the benefit on death under the coverage in respect of the interest at the end of the year, and
- C
- is the amount determined by the formula
D + E
where
- D
- is the portion, in respect of the coverage in respect of the interest, of the amount that would be the present value, determined for the purposes of section 307, on the last policy anniversary that is on or before the last day of the year, of the fund value of the coverage if the fund value of the coverage were equal to the fund value of the coverage at the end of the year, and
- E
- is the portion, in respect of the coverage in respect of the interest, of the amount that would be determined, on that policy anniversary, for paragraph (a) of the description of C in the definition “net premium reserve” in subsection 1401(3) in respect of the coverage, if the benefit on death under the coverage, and the fund value of the coverage, on that policy anniversary were equal to the benefit on death under the coverage and the fund value of the coverage, respectively, at the end of the year.
(1.1) If premiums for a life insurance policy do not depend directly on smoking or sex classification, the probability referred to in paragraph (1)(a) may be determined using rates of mortality otherwise determined, provided that for each age for the policy, the expected value of the aggregate net cost of pure insurance, calculated using those rates of mortality, is equal to the expected value of the aggregate net cost of pure insurance, calculated using the rates of mortality under the 1969–75 mortality tables of the Canadian Institute of Actuaries published in Volume XVI of the Proceedings of the Canadian Institute of Actuaries.
(1.2) If premiums or costs of insurance charges for a coverage under a life insurance policy do not depend directly on smoking or sex classification, the probability referred to in paragraph (1)(b) may be determined using rates of mortality otherwise determined, provided that for each age for the coverage, the expected value of the aggregate net cost of pure insurance, calculated using those rates of mortality, is equal to the expected value of the aggregate net cost of pure insurance, calculated using the rates of mortality that would be calculated under paragraph (1)(b) in respect of the coverage using the mortality tables described in paragraph 1401(4)(b).
- Date modified: