Increasing globalization, combined with Canada’s reputation as a safe and financially well-regulated country, has resulted in the increased immigration of individuals with business interests to Canada. This in turn can create a plethora of tax issues for new residents who continue to own, either personally or through a private corporation, financial products that were acquired in the foreign jurisdiction. This article will specifically address the income tax consequences of owning a life insurance policy acquired in a foreign jurisdiction, where such a policy is held directly by the individual or through a wholly-owned foreign corporation of the individual, and that individual becomes a Canadian resident.

The article will begin with a general summary of the relevant provisions of the Income Tax Act2 which relate to the taxation of life insurance policies for Canadian tax purposes.

Topics covered in this report include:

  • Canadian Taxation of Life Insurance Policies – Overview
  • Taxation of Life Insurance – Detailed Analysis
  • If policies were owned directly by the father
  • If the policies are owned by ForeignCo
  • Tax Treatment of Shares in ForeignCo to Father
  • Capital Dividend Account of ForeignCo
  • Rules Applicable to the Policies after Father has become a Resident

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This publication has been translated into French.

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