Effective November 27, 2021, the deferred sales charge and low load sales charge purchase options will no longer be available for purchase on Sun Life Global Investments mutual funds. Switches between funds of the same sales charge purchase option will be permitted.

Non-registered taxation of surrenders or withdrawals for non-residents

This document outlines the tax rates for non-registered policies when the client is:

  • a Canadian resident at issue and a non-resident at time of surrender/withdrawal, or
  • a non-resident at both issue and surrender/withdrawal.

The following tax rates apply to:

  • non-registered deferred accumulation annuities already set up,
  • Accumulation Annuities (AAs), and
  • Superflex.

Taxation of non-registered deferred annuities for non-residents

For income tax purposes, the taxation of non-registered annuities is based on:

  • where your client was a resident when:
  • they completed the application, or
  • the policy was issued.

Canadian resident at issue and non-resident at surrender/withdrawal

A deferred annuity is considered a life insurance policy in Canada. The Income Tax Act specifically classifies the annuity as taxable Canadian property in Sections 115 and 116.
In order for a deferred annuity to be a life insurance policy in Canada, it must be sold to a person who is a resident in Canada at the time the policy was issued.

For all non-residents who were Canadian at issue and non-resident at disposition (full or partial withdrawal)

  1. Have your client complete and sign a form E73 - Letter of authorization - non-resident.

  2. Send the completed form to 300B25.

If no form is received from the client

Subsection 116 (5.3) of the Income Tax Act states that we must withhold taxes in the amount of 50% of the money from the full or partial withdrawal.

When we receive form E73

  1. We'll process the transaction.
  2. We'll complete form T2062B (Notice of Dispositions of Life Insurance Policies in Canada By a Non-resident of Canada) showing the policy gain on the form.
  3. We'll send a copy of the completed form to your client.
  4. We'll send form T2062B along with form E73 to the Canada Revenue Agency (CRA).

For policy gains of less than $450.45

There's no tax payable on policy gains of less than $450.45.

For non-resident payments where the life insured was a Quebec resident at the time the policy was issued

We're legally obligated to withhold an additional 30% Quebec tax. The policy owner may apply to CRA for a refund of the provincial portion of the federal tax. This can be requested through the International Tax Office.

Annual taxable amount Composite rate Deduction
$0 to $48,535.00 22.20% $0
$48,535.01 to $97,069.00 30.34% $3,950.75
$97,069.01 to $150,473.00 38.48% $11,852.17
$150,473.01 to $214,368.00 42.92% $18,533.17
$214,369.00 + 48.84% $31,223.75

Annual taxable amount Composite rate Deduction
$0 to $47,630.00 22.20% $0
$47,630.01 to $95,259.00 30.34% $3,877.09
$95,259.01 to $147,667.00 38.48% $11,631.16
$147,667.01 to $210,371.00 42.92% $18,187.58
$210,371.00 + 48.84% $30,641.54

Annual taxable amount Composite rate Deduction
$0 to $46,605.00 22.20% $0
$46,605.01 to $93,208.00 30.34% $3,793.65
$93,208.01 to $144,489.00 38.48% $11,380.78
$144,489.01 to $205,842.00 42.92% $17,796.09
$205,842.00 + 48.84% $29,981.94

Annual taxable amount Composite rate Deduction
$0 to $45,916.00 22.20% $0
$45,916.01 to $91,831.00 30.34% $3,737.56
$91,831.01 to $142,353.00 38.48% $11,212.61
$142,353.01 to $202,800.00 42.92% $17,533.08
$202,800.00 + 48.84% $29,538.84

Annual taxable amount Composite rate Deduction
$0 to $45,282.00 22.20% $0
$45,282.01 to $90,563.00 30.34% $3,685.95
$90,563.01 to $140,388.00 38.48% $11,057.78
$140,388.01 to $200,000.00 42.92% $17,291.01
$200,000.00 + 48.84% $29,131.01

Annual taxable amount Composite rate Deduction
$0 to $44,701.00 22.20% $0
$44,701.01 to $89,401.00 32.56% $4,631.02
$89,401.01 to $138,586.00 38.48% $9,923.56
$138,586.00 + 42.92% $16,076.78

Annual taxable amount Composite rate Deduction
$0 to $43,953 22.20% $0
$43,953.01 to $87,907 32.56% $4,553.53
$87,907.01 to $136,270 38.48% $9,757.63
$136,207.01+ 42.92% $15,808.01

Annual taxable amount Composite rate Deduction
$0 to $43,561 22.20% $0
$43,561.01 to $87,123 32.56% $4,512.92
$87,123.01 to $135,054 38.48% $9,670.60
$135,054.01+ 42.92% $15,667.00

Annual taxable amount Composite rate Deduction
$0 to $42,707 22.20% $0
$42,707.01 to $85,414 32.56% $4,424.45
$85,414.01 to $132,406 38.48% $9,480.95
$132,406.01+ 42.92% $15,359.78

Non-resident at issue and at surrender or withdrawal

A deferred annuity is considered a life insurance policy in Canada, however, if the person is not a resident in Canada at the time the policy was issued, the policy is covered under section 212 (1) (o) of the Income Tax Act.
When surrender gains are triggered by a surrender or withdrawal, we are required to withhold tax based on the applicable tax treaty rates.

For countries that have a tax treaty with Canada

For more information on the tax rate for non-registered Accumulation Annuities (AAs) please refer to Withholding tax rates around the world. You'll find the tax rate for the applicable country of residence in the column with the heading 'Lump sum annuity'.

For countries that do NOT have a tax treaty with Canada

  • The rate is currently 25% of the surrender gain.
  • We will issue a NR4 tax slip at year-end.