Principal Issues: [TaxInterpretations translation] 1) Will the exemption in the provision apply before the provision becomes law; and 2) would the exemption apply if a provincial rather than federal authority were involved?
Position: No exemption is granted until the proposed legislation becomes law, and in light of the current requirement that the federal Superintendent of Financial Institutions be a party to the reinsurance trust deed.
Reasons: An opinion has been requested on the application of this provision of the International Tax Directorate.
XXXXXXXXXX 2004-009859 Alain Godin March 22, 2005
Dear Sir,
Subject: Application of paragraph 212(9)(d) of the Act
This is in response to your letter of September 24, 2004 requesting an opinion on the application of paragraph 212(9)(d) of the Income Tax Act (the "Act"). You are seeking confirmation from the Canada Revenue Agency:
1) That it would apply proposed paragraph 212(9)(d) to a situation coming within it even though the proposed paragraph has not yet received Royal Assent;
2) That a trust created pursuant to a reinsurance trust indenture to which the authority in the province in which the insurance company was incorporated is a party rather than the federal Superintendent of Financial Institutions and which is established in accordance with guidelines issued by that provincial authority for reinsurance arrangements with unlicensed insurers, is covered by paragraph 212(9)(d).
Comments
Section 212(9)(d) provides an exemption from Part XIII tax withholding. To answer your first question, we have made inquiries with the division responsible for withholding of Part XIII tax. We are advised that until the proposed legislation receives Royal Assent, no exemptions are permitted. With respect to your second question, we cannot confirm your request. In interpreting this provision, we cannot substitute a provincial authority for the federal Superintendent of Financial Institutions, as the language of the provision is very clear. As discussed with you on the phone, this issue has been raised with the Department of Finance and we understand that they intend to review this matter carefully.
We hope that these comments are of assistance.
Best regards,
Alain Godin
for the Director
International Operations and Trusts Division
Income Tax Rulings Directorate
Policy and Planning Branch