Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: Is the sale and purchase of securities between registered plans of the taxpayer at fair market value, a prohibited transaction as referred to in the 2011 Budget?
Position: Question of fact.
Reasons: Where the transfer is considered a "swap transaction" and an "advantage" is created, the fair market value of the "advantage" would be subject to tax under section 207.05.
XXXXXXXXXX
W. Doiron
2012-046061
December 12, 2012
Dear XXXXXXXXXX
Re: Swap of securities between registered plans
This is in response to your letter dated August 20, 2012 in which you request whether the sale and purchase ("swap") of securities between registered plans of the same taxpayer at fair market price ("FMV") is a prohibited transaction as referred to in the 2011 federal budget.
The Income Tax Act (the "Act") was amended to implement a number of anti-avoidance rules for registered retirement savings plans ("RRSP") and registered retirement income funds ("RRIF"), which were announced in the 2011 federal budget, as updated on June 6, 2011. The existing rules that effectively prohibited swap transactions between tax free savings accounts ("TFSA") and other accounts were extended to RRSPs and RRIFs as of July 1, 2011. However, registered education savings plans ("RESP") are not subject to these rules.
Pursuant to section 207.05 of the Act, a special tax applies if an "advantage", as defined under subsection 207.01(1) of the Act, is provided to:
- the annuitant or holder of an RRSP, RRIF, or TFSA;
- the registered plan itself; or
- any other person not dealing at arm's length with the annuitant or holder.
The tax is generally equal to the FMV of the "advantage" and is payable by the annuitant or holder of the registered plan, unless the advantage was extended by the issuer or carrier of the registered plan (or non-arm's length person), in which case the tax is payable by the issuer or carrier.
A benefit that is an increase in the total FMV of the property held in connection with the registered plan where it is reasonable to consider that the increase is attributable, directly or indirectly, to a swap transaction is expressly included in the list of transactions that are treated as an "advantage" under these rules. For this purpose, a swap transaction, as defined in subsection 207.01(1) of the Act, is any transfer of property between a registered plan and the annuitant or holder of the registered plan or non-arm's length person, subject to certain exceptions. However, contributions, distributions, and purchase and sale transactions between an individual's two plans with the same tax attributes (i.e., TFSA to TFSA or RRSP to RRSP/RRIF) are not treated as swap transactions.
We trust these comments will be of some assistance.
Yours truly,
Mary Pat Baldwin, CA
Manager
Deferred Income Plans Section I
Financial Industries and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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