Jayson Lowe explains why the CRA doesn't tax dividends from whole life insurance policies in Canada. As long as dividends stay inside the policy or get reinvested into it, there's no taxable disposition. Cash out the dividends and you owe tax.
If the government is looking into all sorts of new tax grabs, what prevents them from taxing dividends from dividend paying whole life insurance policies?
Well, there's nothing preventing them from doing that right now. If the policy owner takes those dividends out of the policy in the form of cash, then the dividends will grow to the point where they do trigger a taxable event. And so as long as you're chunking those dividends back into the policy, there's no disposition for tax purposes. So I hope that helps.
