At the 2015 CLHIA Tax Officers’ Meeting, CRA indicated that there is a review underway relating to new types of leveraged insured annuity arrangements. What are the structures of these arrangements and CRA’s concerns? After referring to arrangements which “technically escaping the LIA policy definition,” CRA stated:
[T]he CRA identified LIAs where products that form part of the arrangements are interdependent and would not have been otherwise issued without the others. The CRA is concerned with these arrangements because they involve manipulating the terms of the products (including pricing) that form part of the arrangements and the issuance of products that would not have been otherwise issued on a stand-alone basis (including life insurance policies insuring non-insurable lives) to obtain unintended tax benefits.
…[I]f the terms of a life insurance policy and an annuity contract [are] such that neither contract would be issued without the other, it might be possible to conclude that they represent the issuance of one contract. The CRA has also expressed the view that the general anti-avoidance rule found in section 245… could apply.
The CRA’s concerns with newly identified arrangements will be brought to the attention of Finance Canada… .