Tax Memo: Draft Legislation Affects Insurers and Other Financial Institutions
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Draft legislation released by the Department of Finance on November 7, 2007, is intended to simplify the taxation of entities defined in the Income Tax Act as “financial institutions” by better aligning the tax rules with the financial instruments accounting standard that came into effect on October 1, 2006. However, the draft rules also apply to unregulated entities that have captive banking or insurance arrangements. Despite the changes, some uncertainty remains.
The draft rules are generally effective for taxation years beginning after September 30, 2006. They are consistent with statements made by the Department of Finance in a December 28, 2006 press release and in comfort letters. Public comment is requested by November 30, 2007.
The changes implemented by the draft legislation are not substantively enacted for accounting purposes. Read the PDF below to learn the legislation's key changes and its effect on the financial services industry.
