Advance Income Tax Ruling
June 02, 1997
(IC 70-6R3)
Document number:9711505
Income Tax Act: 6(1)(a), 6(1)(f), 248(1)
Interpretation Bulletins: IT-339R@, Meaning of "private
health services plan"
Principal Issues:
Critical Illness Insurance
1. Are premiums paid by an Employer in respect of such coverage
a taxable benefit under paragraph 6(1)(a) of the Act?
2. Is the lump-sum payment received free from income tax (i.e.,
paragraph 6(1)(f) does not apply?
3. Are premiums considered medical expenses under paragraph
118.2(2)(q) of the Act?
4. Are the premiums tax deductible by the Employer?
[These are the initial questions being responded to, which
are in the Advance Tax Ruling - June 02, 1997]
The above request for an Advance Income Tax Ruling (the full
wording can be provided upon request) is summarized in the
following points. The conclusion reached by both Pacific Rim
Administration Services Ltd. and other professional analysts
since following this Advance Income Tax Ruling, is that a
"private health services plan"policy or contract
cannot be used to provide an Employee with the Critical Illness
benefits. The hospital and medical expense components are
not deemed covered or provided for as required in a "private
health services plan".
* The "private health services plan"must be strictly
for expenses with respect to hospital or medical care or expenses
which normally would otherwise have qualified under subsection
118.2(2) of the Act as medical expenses for the purpose of
the medial expense credit under subsection 118.2(1) of the
Act.
* Based on the description of Critical Illness insurance,
the payment of a lump-sum benefit upon the first occurrence
of a medical event does not appear to Canada Customs &
revenue Agency to depend on, require, or otherwise relate
to the incurrence of any hospital or medical expense, or any
combination of such expense by the individual.
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