| 19(1) | File No. 5-8643 |
| A. Seidel | |
| (613) 957-8960 |
November 10, 1989
Dear Sirs:
This is in reply to your letter dated August 29, 1989 concerning the definition of an insurance corporation for the purposes of the Income Tax Act (the "Act") and specifically, paragraph (d) of the definition of specified financial institution ("SFI") in subsection 248(1) of the Act.
An insurance corporation is defined in subsection 248(1) of the Act as "a corporation that carries on an insurance business" but the Act does not define what constitutes carrying on an insurance business. Subsection 138(1) of the Act deems corporations that are party to certain types of contracts to have been carrying on an insurance business.
Whether a corporation carries on an insurance business is a question of fact which can only be determined after the thorough review of all the activities engaged in by the corporation. The situation described in your letter lacks sufficient detail to allow such a determination. We are, however, prepared to provide the following general comments.
It is our view that factors such as a corporation being registered as an insurance company, being party to contracts described in subsection 138(1) of the Act, and being required to be listed with, and to report to, a federal or provincial regulatory body, such as the Superintendent of Insurance, would be indicative of a corporation that carries on an insurance business.
It is our view that an insurance corporation which has ceased to sell new contracts but continues to receive premiums on existing contracts, invest premiums and satisfy contractual obligations, continues to carry on an insurance business.
Accordingly, where it can be established that a corporation carries on an insurance business, such a corporation would be a SFI pursuant to paragraph (d) of the definition of a SFI in subsection 248(1) of the Act. In addition, pursuant to paragraph (f) of the definition of a SFI, a corporation controlled by an insurance corporation, or pursuant to paragraph (g) of the definition of a SFI, a corporation related to an insurance corporation, would each be a SFI.
While we hope our comments are of assistance to you they do not constitute an advance income tax ruling and therefore are not binding on the Department in respect of a specific situation.
Yours truly,
for DirectorFinancial Industries DivisionRulings Directorate