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Fall Economic Statement Implementation Act, 2022 (S.C. 2022, c. 19)

Assented to 2022-12-15

PART 1Amendments to the Income Tax Act and Other Legislation (continued)

C.R.C., c. 945Income Tax Regulations (continued)

  •  (1) The definitions Canadian outstanding premiums, foreign policy loan, mean Canadian outstanding premiums, mean policy loans, outstanding premiums and reinsurance recoverable in subsection 2400(1) of the Regulations are repealed.

  • (2) The definitions Canadian reserve liabilities, property and casualty surplus, weighted Canadian liabilities and weighted total liabilities in subsection 2400(1) of the Regulations are replaced by the following:

    Canadian reserve liabilities

    Canadian reserve liabilities of an insurer as at the end of a taxation year means the amount determined by the formula

    A − A.1 + A.2 + A.3 − (0.9 × B) − (C − (0.9 × D))

    where

    A
    is the total of the insurer’s liabilities and reserves including liabilities for segregated fund guarantees (other than policyholders’ liabilities or a liability for an obligation to pay a benefit under a segregated fund policy in respect of which subparagraphs 1406(b)(i) and (ii) apply) reported as at the end of the year in respect of
    • (a) life insurance policies in Canada,

    • (b) fire insurance policies issued or effected in respect of property situated in Canada, and

    • (c) insurance policies of any other class covering risks ordinarily within Canada at the time the policy was issued or effected;

    A.1
    is the total of all amounts each of which is the amount of an item reported by the insurer as an insurance contract asset as at the end of the year in respect of insurance policies described in any of paragraphs (a) to (c) of the description of A;
    A.2
    is the total of all amounts each of which is an amount of funds withheld as at the end of the year by the insurer in respect of the reinsurance of a risk under an insurance policy described in any of paragraphs (a) to (c) of the description of A;
    A.3
    is the total of all amounts each which is an amount recoverable as at the end of the year by the insurer under a funds withheld arrangement in respect of the reinsurance of a risk by the insurer under an insurance policy described in any of paragraphs (a) to (c) of the description of A;
    B
    is the total of all amounts each of which is, in respect of a group of insurance contracts of the insurer at the end of the year,
    • (a) the contractual service margin for the group, if no portion of the contractual service margin is in respect of a policy other than a policy that

      • (i) is described in any of paragraphs (a) to (c) of the description of A,

      • (ii) is

        • (A) a life insurance policy in Canada,

        • (B) a policy that insures risk in respect of a financial loss of a lender on a loan made on the security of real property,

        • (C) a non-cancellable or guaranteed renewable accident and sickness policy in respect of accident and sickness insurance (as defined in subsection 1408(1)), or

        • (D) a policy in respect of title insurance (as defined in subsection 1408(1)), and

      • (iii) is not a segregated fund policy, and

    • (b) in any other case, the amount that would be the contractual service margin for the group if the amount excluded the portion that is in respect of policies other than policies that meet the conditions in subparagraphs (a)(i) to (iii);

    C
    is the total of all amounts each of which is an amount, in respect of a group of reinsurance contracts held by the insurer at the end of the year, that is
    • (a) the reinsurance contract held amount for the group, if no portion of the reinsurance contract held amount is in respect of the reinsurance of

      • (i) a risk under a policy other than a policy that meets the condition in subparagraph (a)(i) of the description of B, or

      • (ii) an obligation to pay a benefit under a segregated fund policy in respect of which subparagraphs 1406(b)(i) and (ii) apply, and

    • (b) in any other case, the amount that would be the reinsurance contract held amount for the group if the amount were determined excluding any portion that is in respect of the reinsurance of either

      • (i) a risk under a policy other than a policy that meets the condition under subparagraph (a)(i) of the description of B, or

      • (ii) an obligation to pay a benefit under a segregated fund policy in respect of which subparagraphs 1406(b)(i) and (ii) apply; and

    D
    is the total of all amounts each of which is the amount, in respect of a group of reinsurance contracts held by the insurer at the end of the year, that is
    • (a) if no portion of the contractual service margin for the group is in respect of a risk under a policy other than a policy that meets the conditions in subparagraphs (a)(i) to (iii) of the description of B, the contractual service margin for the group, and

    • (b) in any other case, the amount that would be the contractual service margin for the group if the amount were determined excluding any portion that is in respect of the reinsurance of a risk under a policy other than a policy that meets the conditions in subparagraphs (a)(i) to (iii) of the description of B. (passif de réserve canadienne)

    property and casualty surplus

    property and casualty surplus of an insurer for a taxation year means the amount determined by the formula

    0.075 × (A + B + C + D − E − F) + 0.5 × (G + H)

    where

    A
    is the total of all amounts each of which is the liability for remaining coverage for a group of insurance contracts of the insurer at the end of the year that is in respect of property and casualty insurance;
    B
    is the total of all amounts each of which is the liability for remaining coverage for a group of insurance contracts of the insurer at the end of the preceding taxation year that is in respect of property and casualty insurance;
    C
    is the total of all amounts each of which is the liability for incurred claims for a group of insurance contracts of the insurer at the end of the year that is in respect of property and casualty insurance;
    D
    is the total of all amounts each of which is the liability for incurred claims for a group of insurance contracts of the insurer at the end of the preceding taxation year that is in respect of property and casualty insurance;
    E
    is the total of all amounts each of which is an amount, in respect of a group of reinsurance contracts held by the insurer at the end of the year, that is
    • (a) if no portion of the reinsurance contract held amount for the group is in respect of the reinsurance of a risk under a policy other than a policy that is in respect of property and casualty insurance, the reinsurance contract held amount for the group, and

    • (b) in any other case, the amount that would be the reinsurance contract held amount for the group if the reinsurance contract held amount were determined excluding any portion that is in respect of the reinsurance of a risk under a policy other than policies in respect of property and casualty insurance;

    F
    is the total of all amounts each of which is an amount, in respect of a group of reinsurance contracts held by the insurer at the end of the preceding taxation year, that is
    • (a) if no portion of the reinsurance contract held amount for the group is in respect of the reinsurance of a risk under a policy other than a policy that is in respect of property and casualty insurance, the reinsurance contract held amount for the group, and

    • (b) in any other case, the amount that would be the reinsurance contract held amount for the group if the reinsurance contract held amount were determined excluding any portion that is in respect of the reinsurance of a risk under a policy other than policies in respect of property and casualty insurance;

    G
    is the insurer’s investment valuation reserve as at the end of the year in respect of its property and casualty insurance business; and
    H
    is the insurer’s investment valuation reserve as at the end of its preceding taxation year in respect of its property and casualty insurance business. (excédent provenant de l’assurance de dommages)
    weighted Canadian liabilities

    weighted Canadian liabilities of an insurer as at the end of a taxation year means the amount determined by the formula

    (3 × A) + B

    where

    A
    is the amount determined by the formula

    C − (0.9 × D) − (E − (0.9 × F))

    where

    C
    is the total of all amounts each of which is an amount in respect of an insurance business carried on by the insurer in Canada and that is reported as a liability (other than policyholders’ liabilities or a liability for an obligation to pay a benefit under a segregated fund policy in respect of which subparagraphs 1406(b)(i) and (ii) apply) as at the end of the year in respect of
    • (a) a life insurance policy in Canada (other than an annuity), or

    • (b) an accident and sickness insurance policy,

    D
    is the total of all amounts each of which is an amount, in respect of a group of insurance contracts of the insurer at the end of the year, that is
    • (a) the contractual service margin for the group, if no portion of the contractual service margin is in respect of a policy other than a policy that

      • (i) is described in paragraph (a) or (b) of the description of C,

      • (ii) is

        • (A) a life insurance policy, or

        • (B) a non-cancellable or guaranteed renewable accident and sickness policy in respect of accident and sickness insurance (as defined in subsection 1408(1)),

      • (iii) is not a segregated fund policy, and

      • (iv) is in respect of an insurance business carried on by the insurer in Canada, and

    • (b) in any other case, the amount that would be the contractual service margin for the group if the amount were determined excluding any portion that is in respect of a policy other than a policy that meets the conditions in subparagraphs (a)(i) to (iv),

    E
    is the total of all amounts each of which is an amount, in respect of a group of reinsurance contracts held by the insurer at the end of the year, that is
    • (a) the reinsurance contract held amount for the group, if no portion of the reinsurance contract held amount for the group is in respect of the reinsurance of

      • (i) a risk under a policy other than a policy that meets the conditions under subparagraphs (a)(i) and (iv) of the description of D, or

      • (ii) an obligation to pay a benefit under a segregated fund policy in respect of which subparagraphs 1406(b)(i) and (ii) apply, and

    • (b) in any other case, the amount that would be the reinsurance contract held amount for the group if the amount were determined excluding any portion that is in respect of the reinsurance of either

      • (i) a risk under a policy other than a policy that meets the conditions under subparagraphs (a)(i) and (iv) of the description of D, or

      • (ii) an obligation to pay a benefit under a segregated fund policy in respect of which subparagraphs 1406(b)(i) and (ii) apply, and

    F
    is the total of all amounts each of which is the amount, in respect of a group of reinsurance contracts held by the insurer at the end of the year, that is
    • (a) if no portion of the contractual service margin for the group is in respect of the reinsurance of a risk under a policy other than a policy that meets the conditions in subparagraphs (a)(i) to (iv) of the description of D, the contractual service margin for the group, and

    • (b) in any other case, the amount that would be the contractual service margin for the group if the amount were determined excluding any portion that is in respect of the reinsurance of a risk under a policy other than a policy that meets the conditions in subparagraphs (a)(i) to (iv) of the description of D; and

    B
    is the amount determined by the formula

    G − (0.9 × H) − (I − (0.9 × J))

    where

    G
    is the total of all amounts each of which is an amount in respect of an insurance business carried on by the insurer in Canada and that is reported as a liability (other than policyholders’ liabilities or a liability for an obligation to pay a benefit under a segregated fund policy in respect of which subparagraphs 1406(b)(i) and (ii) apply) as at the end of the year except to the extent the liability is in respect of
    • (a) an insurance policy described in paragraph (a) or (b) of the description of C, or

    • (b) a debt incurred or assumed by the insurer to acquire a property of the insurer,

    H
    is the total of all amounts each of which is an amount, in respect of a group of insurance contracts of the insurer at the end of the year, that is
    • (a) the contractual service margin for the group, if no portion of the contractual service margin is in respect of a policy other than a policy that

      • (i) is not described in paragraph (a) or (b) of the description of C,

      • (ii) is

        • (A) a life insurance policy,

        • (B) a policy in respect of mortgage insurance (as defined in subsection 1408(1)), or

        • (C) a policy in respect of title insurance (as defined in subsection 1408(1)),

      • (iii) is not a segregated fund policy, and

      • (iv) is in respect of an insurance business carried on by the insurer in Canada, and

    • (b) in any other case, the amount that would be the contractual service margin for the group if the amount were determined excluding any portion that is in respect of a policy other than a policy that meets the conditions in subparagraphs (a)(i) to (iv),

    I
    is the total of all amounts each of which is an amount, in respect of a group of reinsurance contracts held by the insurer at the end of the year, that is
    • (a) the reinsurance contract held amount for the group, if no portion of the reinsurance contract held amount for the group is in respect of the reinsurance of

      • (i) a risk under a policy other than a policy that meets the conditions under subparagraphs (a)(i) and (iv) of the description of H, or

      • (ii) an obligation to pay a benefit under a segregated fund policy in respect of which subparagraphs 1406(b)(i) and (ii) apply, and

    • (b) in any other case, the amount that would be the reinsurance contract held amount for the group if the amount were determined excluding any portion that is in respect of the reinsurance of either

      • (i) a risk under a policy other than a policy that meets the conditions under subparagraphs (a)(i) and (iv) of the description of H, or

      • (ii) an obligation to pay a benefit under a segregated fund policy in respect of which subparagraphs 1406(b)(i) and (ii) apply, and

    J
    is the total of all amounts each of which is the amount, in respect of a group of reinsurance contracts held by the insurer at the end of the year, that is
    • (a) if no portion of the contractual service margin for the group is in respect of a risk under a policy other than a policy that meets the conditions in subparagraphs (a)(i) to (iv) of the description of H, the contractual service margin for the group, and

    • (b) in any other case, the amount that would be the contractual service margin for the group if the amount were determined excluding any portion that is in respect of the reinsurance of a risk under a policy other than a policy that meets the conditions in subparagraphs (a)(i) to (iv) of the description of H. (passif canadien pondéré)

    weighted total liabilities

    weighted total liabilities of an insurer as at the end of a taxation year means the amount determined by the formula

    (3 × A) + B

    where

    A
    is the amount determined by the formula

    C − (0.9 × D) − (E − (0.9 × F))

    where

    C
    is the total of all amounts each of which is an amount in respect of an insurance business carried on by the insurer and that is reported as a liability (other than policyholders’ liabilities or a liability for an obligation to pay a benefit under a segregated fund policy in respect of which subparagraphs 1406(b)(i) and (ii) apply) as at the end of the year in respect of
    • (a) a life insurance policy (other than an annuity), or

    • (b) an accident and sickness insurance policy,

    D
    is the total of all amounts each of which is an amount, in respect of a group of insurance contracts of the insurer at the end of the year, that is
    • (a) the contractual service margin for the group, if no portion of the contractual service margin is in respect of a policy other than a policy that

      • (i) is described in paragraph (a) or (b) of the description of C,

      • (ii) is

        • (A) a life insurance policy, or

        • (B) a non-cancellable or guaranteed renewable accident and sickness policy in respect of accident and sickness insurance (as defined in subsection 1408(1)), and

      • (iii) is not a segregated fund policy, and

    • (b) in any other case, the amount that would be the contractual service margin for the group if the amount were determined excluding any portion that is in respect of a policy other than a policy that meets the conditions in subparagraphs (a)(i) to (iii),

    E
    is the total of all amounts each of which is an amount, in respect of a group of reinsurance contracts held by the insurer at the end of the year, that is
    • (a) the reinsurance contract held amount for the group, if no portion of the reinsurance contract held amount for the group is in respect of the reinsurance of

      • (i) a risk under a policy other than a policy that meets the condition under subparagraph (a)(i) of the description of D, or

      • (ii) an obligation to pay a benefit under a segregated fund policy in respect of which subparagraphs 1406(b)(i) and (ii) apply, and

    • (b) in any other case, the amount that would be the reinsurance contract held amount for the group if the amount were determined excluding any portion that is in respect of the reinsurance of either

      • (i) a risk under a policy other than a policy that meets the condition under subparagraph (a)(i) of the description of D, or

      • (ii) an obligation to pay a benefit under a segregated fund policy in respect of which subparagraphs 1406(b)(i) and (ii) apply, and

    F
    is the total of all amounts each of which is the amount, in respect of a group of reinsurance contracts held by the insurer at the end of the year, that is
    • (a) if no portion of the contractual service margin for the group is in respect of the reinsurance of a risk under a policy other than a policy that meets the conditions in subparagraphs (a)(i) to (iii) of the description of D, the contractual service margin for the group, and

    • (b) in any other case, the amount that would be the contractual service margin for the group if the amount were determined excluding any portion that is in respect of the reinsurance of a risk under a policy other than a policy that meets the conditions in subparagraphs (a)(i) to (iii) of the description of D; and

    B
    is the amount determined by the formula

    G − (0.9 × H) − (I − (0.9 × J))

    where

    G
    is the total of all amounts each of which is an amount in respect of an insurance business carried on by the insurer and that is reported as a liability (other than policyholders’ liabilities or a liability for an obligation to pay a benefit under a segregated fund policy in respect of which subparagraphs 1406(b)(i) and (ii) apply) as at the end of the year except to the extent the liability is in respect of
    • (a) an insurance policy described in paragraph (a) or (b) of the description of C, or

    • (b) a debt incurred or assumed by the insurer to acquire a property of the insurer,

    H
    is the total of all amounts each of which is an amount, in respect of a group of insurance contracts of the insurer at the end of the year, that is
    • (a) the contractual service margin for the group, if no portion of the contractual service margin is in respect of a policy other than a policy that

      • (i) is not described in paragraph (a) or (b) of the description of C,

      • (ii) is

        • (A) a life insurance policy,

        • (B) a policy in respect of mortgage insurance (as defined in subsection 1408(1)), or

        • (C) a policy in respect of title insurance (as defined in subsection 1408(1)), and

      • (iii) is not a segregated fund policy, and

    • (b) in any other case, the amount that would be the contractual service margin for the group if the amount were determined excluding any portion that is in respect of a policy other than a policy that meets the conditions in subparagraphs (a)(i) to (iii),

    I
    is the total of all amounts each of which is an amount, in respect of a group of reinsurance contracts held by the insurer at the end of the year, that is
    • (a) the reinsurance contract held amount for the group, if no portion of the reinsurance contract held amount for the group is in respect of the reinsurance of

      • (i) a risk under a policy other than a policy that meets the condition under subparagraph (a)(i) of the description of H, or

      • (ii) an obligation to pay a benefit under a segregated fund policy in respect of which subparagraphs 1406(b)(i) and (ii) apply, and

    • (b) in any other case, the amount that would be the reinsurance contract held amount for the group if the amount were determined excluding any portion that is in respect of the reinsurance of either

      • (i) a risk under a policy other than a policy that meets the condition under subparagraph (a)(i) of the description of H, or

      • (ii) an obligation to pay a benefit under a segregated fund policy in respect of which subparagraphs 1406(b)(i) and (ii) apply, and

    J
    is the total of all amounts each of which is the amount, in respect of a group of reinsurance contracts held by the insurer at the end of the year, that is
    • (a) if no portion of the contractual service margin for the group is in respect of a risk under a policy other than a policy that meets the conditions in subparagraphs (a)(i) to (iii) of the description of H, the contractual service margin for the group, and

    • (b) in any other case, the amount that would be the contractual service margin for the group if the amount were determined excluding any portion that is in respect of the reinsurance of a risk under a policy other than a policy that meets the conditions in subparagraphs (a)(i) to (iii) of the description of H. (passif total pondéré)

  • (3) Subparagraph (a)(i) of the definition Canadian investment fund in subsection 2400(1) of the Regulations is replaced by the following:

    • (i) the amount of the insurer’s Canadian reserve liabilities as at the end of the year (to the extent that the amount exceeds the amount of surplus appropriations included in that amount), and

  • (4) Clause (a)(ii)(B) of the definition Canadian investment fund in subsection 2400(1) of the Regulations is replaced by the following:

    • (B) the amount determined by the formula

      (I − (0.9 × I.1) − (J − (0.9 × J.1)) + K + L) × (M ÷ N)

      where

      I
      is the total of all amounts each of which is the amount of an item reported as an asset of the insurer as at the end of the year (other than an item that at no time in the year was used or held by the insurer in the course of carrying on an insurance business),
      I.1
      is the total of all amounts each of which is the amount, in respect of a group of reinsurance contracts held by the insurer at the end of the year, that is
      • (I) if no portion of the contractual service margin for the group is in respect of a risk under a segregated fund policy, the contractual service margin for the group, and

      • (II) in any other case, the amount that would be the contractual service margin for the group if the contractual service margin were determined excluding any portion that is in respect of the reinsurance of a risk under a segregated fund policy,

      J
      is the total of all amounts each of which is the amount of an item reported as a liability of the insurer (other than policyholders’ liabilities or a liability that was at any time in the year connected with an asset that was not used or held by the insurer in the course of carrying on an insurance business at any time in the year) as at the end of the year in respect of an insurance business carried on by the insurer in the year,
      J.1
      is the total of all amounts each of which is the contractual service margin for a group of insurance contracts of the insurer at the end of the year (other than a group of segregated fund policies),
      K
      is the total of all amounts each of which is an amount of a deferred realized net gain or an amount expressed as a negative number of a deferred realized net loss of the insurer as at the end of the year,
      L
      is the total of all amounts each of which is an amount of an item reported by the insurer as at the end of the year as a general provision or allowance for impairment in respect of investment property of the insurer for the year,
      M
      is the amount of the insurer’s weighted Canadian liabilities as at the end of the year, and
      N
      is the amount of the insurer’s weighted total liabilities as at the end of the year; and
  • (5) Subparagraph (b)(i) of the definition Canadian investment fund in subsection 2400(1) of the Regulations is replaced by the following:

    • (i) the amount of the insurer’s Canadian reserve liabilities as at the end of the year, and

  • (6) Subparagraph (i)(ii) of the definition Canadian investment property in subsection 2400(1) of the Regulations is replaced by the following:

    • (ii) is supporting the insurer’s Canadian insurance contract liabilities for the year. (bien de placement canadien)

  • (7) Subparagraph (b)(i) of the definition equity limit in subsection 2400(1) of the Regulations is replaced by the following:

    • (i) the insurer’s mean Canadian reserve liabilities for the year, and

  • (8) Subparagraph (c)(ii) of the definition equity limit in subsection 2400(1) of the Regulations is replaced by the following:

    • (ii) 25% of the insurer’s mean Canadian reserve liabilities for the year, and

  • (9) Subparagraph (e)(ii) of the definition investment property in subsection 2400(1) of the Regulations is replaced by the following:

    • (ii) is supporting the insurer’s Canadian insurance contract liabilities for the year. (bien de placement)

  • (10) Paragraphs (a) and (b) of the definition value in subsection 2400(1) of the Regulations are repealed.

  • (11) The portion of paragraph (c) of the definition value in subsection 2400(1) of the Regulations before subparagraph (i) is replaced by the following:

    • (c) in the case of a property that was not owned by the owner throughout the year, the amount, if any, by which

  • (12) Subsection 2400(1) of the Regulations is amended by adding the following in alphabetical order:

    contractual service margin

    contractual service margin for a group of insurance contracts of an insurer, or a group of reinsurance contracts held by the insurer, at the end of a taxation year, has the same meaning as in subsection 138(12) of the Act. (marge sur services contractuels)

    group of insurance contracts

    group of insurance contracts of an insurer has the same meaning as in subsection 138(12) of the Act. (groupe de contrats d’assurance)

    group of reinsurance contracts

    group of reinsurance contracts held by an insurer has the same meaning as in subsection 138(12) of the Act. (groupe de contrats de réassurance)

    group of segregated fund policies

    group of segregated fund policies of an insurer has the same meaning as in subsection 138(12) of the Act. (groupe de polices à fonds réservé)

    liability for incurred claims

    liability for incurred claims for a group of insurance contracts of an insurer at the end of a taxation year has the same meaning as in subsection 138(12) of the Act. (passif au titre des sinistres survenus)

    liability for remaining coverage

    liability for remaining coverage for a group of insurance contracts of an insurer at the end of a taxation year has the same meaning as in subsection 138(12) of the Act. (passif au titre de la couverture restante)

    policyholders’ liabilities

    policyholders’ liabilities of an insurer at the end of a taxation year has the same meaning as in subsection 138(12) of the Act. (obligation envers les titulaires de polices)

    reinsurance contract held amount

    reinsurance contract held amount for a group of reinsurance contracts held by an insurer at the end of a taxation year has the same meaning as in subsection 138(12) of the Act. (montant au titre des contrats de réassurance détenus)

  • (13) Subsection 2400(3) of the Regulations and the heading before it are repealed.

  • (14) Section 2400 of the Regulations is amended by adding the following after subsection (9):

    • (10) A computation that is required to be made under this Part in respect of an insurer’s taxation year that immediately precedes the first taxation year that begins after 2022 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 2022 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.

  • (15) Subsections (1) to (13) apply to taxation years that begin after 2022.

  • (16) Subsection (14) comes into force or is deemed to have come into force on January 1, 2023.

 
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