20 December 2004 External T.I. 2004-0100601E5 - Withholding tax on payments from an RPP

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: Whether an RPP that reimburses an employer in respect of plan administration expenses paid on behalf of the plan by the employer must withhold tax from and report such payments?

Position: Not if the expenses are bona fide administration expenses.

Reasons: They would not constitute a superannuation or pension benefit.

XXXXXXXXXX 								2004-010060
P. Kohnen
December 20, 2004

Dear XXXXXXXXXX:

Re: Technical interpretation - Withholding Tax on Payments from an RPP

This is further to your submission of October 27, 2004, and our telephone conversations (Kohnen/XXXXXXXXXX) regarding the requirement under the Income Tax Act to report and/or withhold taxes in respect of the reimbursement of pension administration expenses paid by a participating employer of a registered pension plan ("RPP") on behalf of the plan and reimbursed by the RPP.

We have reconsidered the comments previously provided in our technical interpretation dated December 9, 2003, our document 2002-016353, regarding the requirement to withhold tax in respect of a refund of plan administration expenses paid by an employer. It is our view that a reimbursement payment paid by an RPP to an employer in respect of bona fide plan administration expenses that have been paid by the employer on behalf of the plan should not constitute a superannuation or pension benefit. Accordingly, there should not be a requirement for the RPP to withhold tax in respect of, or to report, such a payment.

With respect to the particular disbursements described in your submission, it would be a question of fact as to whether each payment by the employer would constitute a bona fide plan administration expense paid on behalf of the plan. In general, the issues that are to be considered in making such a determination include, but are not limited to:

1. whether the expenses are reasonable in the circumstances,

2. whether they are incurred in connection with the operation of the plan, and

3. whether they would normally be incurred by an RPP in fulfilling its plan obligations.

It should be noted that the commentary provided in document 2002-016353 regarding the withholding requirements in respect of a payment from an RPP to a participating employer that represents a return of an overpayment by the employer (regardless of the reason for such overpayment, and whether or not such return is to avoid the revocation of the registration of the RPP), or a payment of plan surplus, remain valid. Any such payments will constitute a superannuation or pension benefit.

We trust that the above comments will be of assistance to you.

Yours truly,

Roberta Albert, CA
For Director
Financial Industries Division
Income Tax Rulings Directorate