Income Tax Act — I-3.3 138
ion with those agreements or arrangements are deemed to be (A) if the agreeing party is a life insurer resident in Canada, or a partnership of which such a life insurer is a member, part of the life insurer’s insurance business carried on in Canada, and (B) if the agreeing party is a foreign affiliate of a taxpayer, or a partnership of which such an affiliate is a member, a separate business, other than an active business, carried on by the affiliate, and (ii) any income from those activities (including income that pertains to or is incident to those activities) is deemed to be, (A) if the agreeing party is a life insurer resident in Canada, income from the life insurer’s insurance business carried on in Canada, and (B) if the agreeing party is a foreign affiliate of a taxpayer, income from the business, other than an active business. Deductions allowed in computing income (3) In computing a life insurer’s income for a taxation year from carrying on its life insurance business in Canada, there may be deducted (a) such of the following amounts as are applicable: (i) any amount that the insurer claims as a policy reserve for the year in respect of its groups of life insurance contracts in Canada at the end of the year, not exceeding the total of amounts that the insurer is allowed by regulation to deduct in respect of those groups, (ii) [Repealed, 2022, c. 19, s. 26] (ii.1) the amount included under paragraph 138(4)(b) in computing the insurer’s income for the taxation year preceding the year, (iii) the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taxation year that began before November 2011) in computing its incomes for taxation years before the year, and (iv) [Repealed, 2013, c. 34, s. 286] (v) each amount (other than an amount credited under a participating life insurance policy) that would be deductible under section 140 in computing the insurer’s income for the year if the reference in that section to “an insurance business other than a life insurance business” were read as a reference to “a life insurance business in Canada”; (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. (d) [Repealed, 1995, c. 21, s. 57(2)] (e) to (g) [Repealed, 2013, c. 34, s. 286] (3.1) [Repealed, 2013, c. 34, s. 286] Amounts included in computing income (4) In computing a life insurer’s income for a taxation year from carrying on its life insurance business in Canada, there shall be included (a) each amount deducted under subparagraph (3)(a)(i) in computing the insurer’s income for the preceding taxation year; (b) the amount prescribed in respect of the insurer for the year in respect of its groups of life insurance contracts in Canada at the end of the year; and (c) the total of all amounts received by the insurer in the year in respect of the repayment of policy loans or in respect of interest on policy loans. Life insurance policy (4.01) For the purposes of subsections 138(3) and 138(4), a life insurance policy includes a benefit under a group life insurance policy or a group annuity contract. (4.1) to (4.3) [Repealed, 2013, c. 34, s. 286] Income inclusion (4.4) If, for a period of time in a taxation year, a life insurer (a) owned land (other than land referred to in paragraph (c) or (d)) or an interest, or for civil law a right, therein that was not held primarily for the purpose of gaining or producing income from the land for the period, (b) had an interes