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Income Tax Act (R.S.C., 1985, c. 1 (5th Supp.))

Full Document:  

Act current to 2022-07-25 and last amended on 2022-07-01. Previous Versions

PART XII.3Tax on Investment Income of Life Insurers (continued)

Marginal note:Tax payable

  •  (1) Every life insurer shall pay a tax under this Part for each taxation year equal to 15% of its taxable Canadian life investment income for the year.

  • Marginal note:Taxable Canadian life investment income

    (2) For the purposes of this Part, the taxable Canadian life investment income of a life insurer for a taxation year is the amount, if any, by which its Canadian life investment income for the year exceeds the total of its Canadian life investment losses for the 20 taxation years immediately preceding the year, to the extent that those losses were not deducted in computing its taxable Canadian life investment income for any preceding taxation year.

  • Marginal note:Canadian life investment income

    (3) For the purposes of this Part, the Canadian life investment income or loss of a life insurer for a taxation year is the positive or negative amount determined by the formula

    A + B - C

    where

    A
    is subject to subsection 211.1(4), the total of all amounts, each of which is in respect of a liability, benefit, risk or guarantee under a life insurance policy that was at any time in the year a taxable life insurance policy of the insurer, determined by multiplying the net interest rate in respect of the liability, benefit, risk or guarantee for the year by 1/2 of the total of
    • (a) the maximum amount that would be determined under paragraph 1401(1)(a), (c) or (d) of the Income Tax Regulations (other than an amount that would be determined under subparagraph 1401(1)(d)(ii) of those Regulations in respect of a disabled life) in respect of the insurer for the year in respect of the liability, benefit, risk or guarantee if subsection 1401(1) of those Regulations applied to all life insurance policies and if that amount were determined without reference to any policy loan or reinsurance arrangement, and

    • (b) the maximum amount that would be determined under paragraph 1401(1)(a), (c) or (d) of the Income Tax Regulations (other than an amount that would be determined under subparagraph 1401(1)(d)(ii) of those Regulations in respect of a disabled life) in respect of the insurer for the preceding taxation year in respect of the liability, benefit, risk or guarantee if subsection 1401(1) of those Regulations applied to all life insurance policies and if that amount were determined without reference to any policy loan or reinsurance arrangement;

    B
    is the total of all amounts, each of which is the positive or negative amount in respect of a life insurance policy that was at any time in the year a taxable life insurance policy of the insurer, determined by the formula

    D - E

    where

    D
    is, subject to subsection 211.1(4), the amount determined by multiplying the percentage determined in the description of A in the definition net interest rate in subsection 211(1) in respect of the year by 1/2 of the total of
    • (a) the maximum amount that would be determined under paragraph 1401(1)(c.1) of the Income Tax Regulations in respect of the insurer for the year in respect of the policy if subsection 1401(1) of those Regulations applied to all life insurance policies and if that amount were determined without reference to any policy loan or reinsurance arrangement, and

    • (b) the maximum amount that would be determined under paragraph 1401(1)(c.1) of the Income Tax Regulations in respect of the insurer for the preceding taxation year in respect of the policy if subsection 1401(1) of those Regulations applied to all life insurance policies and if that amount were determined without reference to any policy loan or reinsurance arrangement, and

    E
    is the amount, if any, by which
    • (a) the total of all amounts determined in respect of the insurer under the description of in respect of the policy for the year and any preceding taxation years ending after 1989

    exceeds the total of

    • (b) all amounts determined in respect of the insurer under the description of E in respect of the policy for taxation years ending before the year, and

    • (c) the amount, if any, by which

      • (i) the maximum amount that would be determined under paragraph 1401(1)(c.1) of the Income Tax Regulations in respect of the insurer for the year in respect of the policy if subsection 1401(1) of those Regulations applied to all life insurance policies and if that amount were determined without reference to any policy loan or reinsurance arrangement

      exceeds

      • (ii) the maximum amount that would be determined under paragraph 1401(1)(c.1) of the Income Tax Regulations in respect of the insurer for its last 1989 taxation year in respect of the policy if subsection 1401(1) of those Regulations applied to all life insurance policies and if that amount were determined without reference to any policy loan or reinsurance arrangement; and

    C
    is the total of all amounts each of which is 100% of the amount required to be included in computing the income of a policyholder under section 12.2 or paragraph 56(1)(j) for which the insurer is required by regulation to prepare an information return in respect of the calendar year ending in the taxation year, in respect of a taxable life insurance policy of the insurer, except that the reference in this description to 100% shall be read as a reference to,
    • (a) where paragraph (a) of the description of B in the definition net interest rate in subsection 211(1) applies for any taxation year in respect of a guaranteed benefit under the policy,

      • 0% 
        for calendar years before 1991,
      • 5% 
        for 1991,
      • 10% 
        for 1992,
      • 15% 
        for 1993,
      • 20% 
        for 1994,
      • 25% 
        for 1995,
      • 30% 
        for 1996,
      • 35% 
        for 1997,
      • 40% 
        for 1998,
      • 45% 
        for 1999, and
      • 50% 
        for calendar years after 1999, and
    • (b) where the policy was at any time after 1989 an existing guaranteed life insurance policy,

      • 0% 
        for the calendar year in which it became a taxable life insurance policy of the insurer,
      • 0% 
        for the first following calendar year,
      • 0% 
        for the second following calendar year,
      • 5% 
        for the third following calendar year,
      • 10% 
        for the fourth following calendar year,
      • 15% 
        for the fifth following calendar year,
      • 20% 
        for the sixth following calendar year,
      • 25% 
        for the seventh following calendar year,
      • 30% 
        for the eighth following calendar year,
      • 35% 
        for the ninth following calendar year,
      • 40% 
        for the tenth following calendar year,
      • 45% 
        for the eleventh following calendar year, and
      • 50% 
        for the twelfth following and subsequent calendar years.
  • Marginal note:Short taxation year

    (4) Where a taxation year of a life insurer is less than 51 weeks, the values of A and D in subsection 211.1(3) for the year are that proportion of those values otherwise so determined that the number of days in the year (other than February 29) is of 365.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • R.S., 1985, c. 1 (5th Supp.), s. 211.1
  • 1994, c. 7, Sch. II, s. 172
  • 1997, c. 25, s. 61
  • 1998, c. 19, s. 213
  • 2005, c. 19, s. 46
  • 2006, c. 4, s. 84

Marginal note:Return

 Every life insurer shall file with the Minister, not later than the day on or before which it is required by section 150 to file its return of income for a taxation year under Part I, a return of taxable Canadian life investment income for that year in prescribed form containing an estimate of the tax payable by it under this Part for the year.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • 1988, c. 55, s. 160

Marginal note:Instalments

  •  (1) Every life insurer shall, in respect of each of its taxation years, pay to the Receiver General on or before the last day of each month in the year, an amount equal to 1/12 of the lesser of

    • (a) the amount estimated by the insurer to be the annualized tax payable under this Part by it for the year, and

    • (b) the annualized tax payable under this Part by the insurer for the immediately preceding taxation year.

  • Marginal note:Annualized tax payable

    (2) For the purposes of subsections 211.3(1) and 211.5(2), the annualized tax payable under this Part by a life insurer for a taxation year is the amount determined by the formula

    (365/A) × B

    where

    A
    is
    • (a) if the year is less than 357 days, the number of days in the year (other than February 29), and

    • (b) otherwise, 365; and

    B
    is the tax payable under this Part by the insurer for the year.
  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • R.S., 1985, c. 1 (5th Supp.), s. 211.3
  • 1998, c. 19, s. 214

Marginal note:Payment of remainder of tax

 Every life insurer shall pay, on or before its balance-due day for a taxation year, the remainder, if any, of the tax payable under this Part by the insurer for the year.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • R.S., 1985, c. 1 (5th Supp.), s. 211.4
  • 2003, c. 15, s. 127

Marginal note:Provisions applicable to Part

  •  (1) Section 152, subsection 157(2.1), sections 158 and 159, subsections 161(1), 161(2), 161(2.1), 161(2.2) and 161(11), sections 162 to 167 and Division J of Part I apply to this Part, with such modifications as the circumstances require.

  • Marginal note:Interest on instalments

    (2) For the purposes of subsection 161(2) and section 163.1 as they apply to this Part, a life insurer is, in respect of a taxation year, deemed to have been liable to pay, on or before the last day of each month in the year, an instalment equal to 1/12 of the lesser of

    • (a) the annualized tax payable under this Part by the insurer for the year, and

    • (b) the annualized tax payable under this Part by the insurer for the immediately preceding taxation year.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • R.S., 1985, c. 1 (5th Supp.), s. 211.5
  • 1994, c. 7, Sch. II, s. 173
  • 1998, c. 19, s. 215

PART XII.4Tax on Qualifying Environmental Trusts

Marginal note:Definitions

  •  (1) The definitions in this section apply for the purposes of this Part.

    excluded trust

    excluded trust, at any time, means a trust that

    • (a) relates at that time to the reclamation of a well;

    • (b) is not maintained at that time to secure the reclamation obligations of one or more persons or partnerships that are beneficiaries under the trust;

    • (c) borrows money at that time;

    • (d) if the trust is not a trust to which paragraph (e) applies, acquires at that time any property that is not described by any of paragraphs (a), (b) and (f) of the definition qualified investment in section 204;

    • (e) if the trust is created after 2011 (or if the trust was created before 2012, it elects in writing filed with the Minister on or before its filing-due date for a particular taxation year to have subparagraphs (i) and (ii) apply to it for the particular taxation year and all subsequent taxation years, and that election is made jointly with Her Majesty in right of Canada or a particular province, depending upon the qualifying law or qualifying contract in respect of the trust),

      • (i) acquires at that time any property that is not described by any of paragraphs (a), (b), (c), (c.1), (d) and (f) of the definition qualified investment in section 204, or

      • (ii) holds at that time a prohibited investment;

    • (f) elected in writing filed with the Minister, before 1998 or before April of the year following the year in which the first contribution to the trust was made, never to have been a qualifying environmental trust; or

    • (g) was at any previous time during its existence not a qualifying environmental trust (as determined under the definition qualifying environmental trust in subsection 248(1) as it applied at that previous time). (fiducie exclue)

    prohibited investment

    prohibited investment, of a trust at any time, means a property that

    • (a) at the time it was acquired by the trust, was described by any of paragraphs (c), (c.1) or (d) of the definition qualified investment in section 204; and

    • (b) was issued by

      • (i) a person or partnership that has contributed property to, or that is a beneficiary under, the trust,

      • (ii) a person that is related to, or a partnership that is affiliated with, a person or partnership that has contributed property to, or that is a beneficiary under, the trust, or

      • (iii) a particular person or partnership if

        • (A) another person or partnership holds a significant interest (within the meaning assigned by subsection 207.01(4) with any modifications that the circumstances require) in the particular person or partnership, and

        • (B) the holder of that significant interest has contributed property to, or is a beneficiary under, the trust. (placement interdit)

    QET income tax rate

    QET income tax rate, for a trust’s taxation year, means the amount, expressed as a decimal fraction, by which

    • (a) the percentage rate of tax provided under paragraph 123(1)(a) for the taxation year

    exceeds

    • (b) the total of

      • (i) the percentage that would, if the trust were a corporation, be its general rate reduction percentage, within the meaning assigned by subsection 123.4(1), for the taxation year, and

      • (ii) the percentage deduction from tax provided under subsection 124(1) for the taxation year. (taux d’impôt sur le revenu des FEA)

    qualifying contract

    qualifying contract, in respect of a trust, means a contract entered into with Her Majesty in right of Canada or a province on or before the later of January 1, 1996 and the day that is one year after the day on which the trust was created. (contrat admissible)

    qualifying environmental trust

    qualifying environmental trust means a trust

    • (a) each trustee of which is

      • (i) Her Majesty in right of Canada or a province, or

      • (ii) a corporation resident in Canada that is licensed or otherwise authorized under the laws of Canada or a province to carry on in Canada the business of offering to the public its services as trustee;

    • (b) that is maintained for the sole purpose of funding the reclamation of a qualifying site;

    • (c) that is, or may become, required to be maintained under

      • (i) the terms of a qualifying contract, or

      • (ii) a qualifying law; and

    • (d) that is not an excluded trust. (fiducie pour l’environnement admissible)

    qualifying law

    qualifying law, in respect of a trust, means

    • (a) a law of Canada or a province that was enacted on or before the later of January 1, 1996 and the day that is one year after the day on which the trust was created; and

    • (b) if the trust was created after 2011, an order made

      • (i) by a tribunal constituted under a law described by paragraph (a), and

      • (ii) on or before the day that is one year after the day on which the trust was created. (loi admissible)

    qualifying site

    qualifying site, in respect of a trust, means a site in Canada that is or has been used primarily for, or for any combination of,

    • (a) the operation of a mine,

    • (b) the extraction of clay, peat, sand, shale or aggregates (including dimension stone and gravel),

    • (c) the deposit of waste, or

    • (d) if the trust was created after 2011, the operation of a pipeline. (site admissible)

  • Marginal note:Charging provision

    (2) Every trust that is a qualifying environmental trust at the end of a taxation year (other than a trust that is at that time described by paragraph 149(1)(z.1) or (z.2)) shall pay a tax under this Part for the year equal to the amount determined by the formula

    A × B

    where

    A
    is the trust’s income (computed as if this Act were read without reference to subsections 104(4) to (31) and sections 105 to 107) under Part I for the year; and
    B
    is the QET income tax rate for the year.
  • Marginal note:Return

    (3) Every trust that is a qualifying environmental trust at the end of a taxation year shall file with the Minister on or before its filing-due date for the year a return for the year under this Part in prescribed form containing an estimate of the amount of its tax payable under this Part for the year.

  • Marginal note:Payment of tax

    (4) Every trust shall pay to the Receiver General its tax payable under this Part for each taxation year on or before its balance-due day for the year.

  • Marginal note:Provisions applicable to Part

    (5) Subsections 150(2) and 150(3), sections 152, 158 and 159, subsections 161(1) and 161(11), sections 162 to 167 and Division J of Part I apply to this Part, with such modifications as the circumstances require.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • R.S., 1985, c. 1 (5th Supp.), s. 211.6
  • 1994, c. 7, Sch. II, s. 173
  • 1995, c. 3, s. 50
  • 1998, c. 19, s. 61
  • 2011, c. 24, s. 69
 
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