dgagitw

Does anyone have any idea how the Canadian incomes tax system treats a payout at maturity (as opposed to on death) from a UK endowment policy?

Aviator

Difference in value from when you became a tax resident (in CAD$) and the disposal value is a capital gain.

JonboyE

To be absolutely sure you need to examine the terms of the policy and then look at how a policy with eqivalent terms would be taxed in Canada. There are a lot of rules becase the governemnt try to stop people converting what would be taxable income into tax-free life assurance proceeds.

However, as a very general rule, the proceeds of the payout less the fair market value of the policy on the day you became tax-redisdent of Canada, less any premiums paid after you moved to Canada, will be a capital gain. 50% added to your taxable income. As always, you have to use the appropriate exchange rates.

dgagitw

Thanks. What would the fair market value be? The cash in value, the amount the poiicy could have been sold for on the traded endowment market or something else?

JonboyE

Whichever one is higher.

dgagitw

Sounds like a plan!