The federal government is cracking down on Canadian life insurance companies with foreign branches and taking new steps to ensure these entities aren’t dodging their domestic tax obligations by shifting income to their foreign units.<\/p>\n
The federal budget, tabled in Ottawa on Wednesday, proposes new rules to ensure that Canadian life insurers are paying the appropriate taxes in Canada on income generated from the insurance of Canadian risks.<\/p>\n
Although corporations based in Canada are generally taxable on their worldwide income, the Income Tax Act provides a special exemption for life insurance companies so that the income from their business in a foreign jurisdiction is not included in their tax base.<\/p>\n
This means that insurers could be avoiding paying taxes in Canada on income earned on Canadian residents’ policies by including this income in their foreign branches, potentially located in low-tax or no-tax jurisdictions.<\/p>\n
Budget 2017 proposes to close that gap. Specifically, the government proposes amending the Income Tax Act to ensure that Canadian life insurers are taxable in Canada with respect to their income from the insurance of Canadian risks.<\/p>\n
Read: Budget 2017<\/a><\/strong><\/p>\n
Read: Government of Canada budget documents<\/a><\/strong><\/p>\n