It is unlikely that testing for compliance with Reg. 306(1) will be routinely performed by the insurer for policies issued outside of Canada where the policyholder is resident in, or immigrates to, Canada. Where the policy is not issued in Canadian currency, it would appear that application of the exempt test could result in accidental failure of the test simply as a result of variations from year to year in currency conversion rates. How should the exempt test be applied to policies that are not “life insurance policies in Canada”?
After noting that the “rules in section 306 … apply on a policy-by-policy basis and require actuarial calculations and information that only the issuing insurer will possess,” CRA responded:
A life insurance policy issued by a non-resident insurer is not specifically precluded from qualifying as an "exempt policy" and thus, such a policy could qualify provided the criteria in section 306 of the Regulations are satisfied. Given that the information to determine the exempt status of a particular life insurance policy is only available in the accounts of the insurer, the onus is on the policyholder to establish that the policy qualifies as an exempt policy.