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: Request to reduce withholding tax on a LIRSP withdrawal (withdrawal due to financial hardship) of a status Indian.
Position: Information given to taxpayer regarding forms required to request a reduction in withholdings
Reasons: Administrative assistance only
2008-030288
XXXXXXXXXX P. Burnley
(613) 957-3498
December 16, 2008
Dear XXXXXXXXXX :
Re: Locked-in Retirement Savings Plan (LIRSP) Withholding Tax
This is in response to your letter of December 4, 2008, inquiring about reducing the withholding tax on withdrawals from your LIRSP.
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling submitted in the manner set out in Information Circular 70-6R5, "Advanced Income Tax Rulings". This Information Circular and other Canada Revenue Agency ("CRA") publications can be accessed on the internet at http://www.cra-arc.gc.ca. Although we cannot comment on your specific situation, we are able to provide the following information, which may be of assistance.
You have asked to have withdrawals from your LIRSP exempted from withholding tax, on the basis that your contributions to this plan were made from income that was exempt from tax under section 87 of the Indian Act and paragraph 81(1)(a) of the Income Tax Act (that is, because it was income of an Indian situated on a reserve). We cannot confirm whether or not any of your income is or was exempt from tax. We also cannot confirm whether or not you are able to withdraw amounts from your LIRSP. That must be determined by you and the LIRSP administrator.
Information on reducing tax deductions at source is available on the CRA's website at http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/clcltng/ncmtx/rdcng/menu-eng.html.
Generally, you can either complete form T1213 'Request to Reduce Tax Deductions at Source', or prepare a written request to reduce tax withholdings, and then send either the T1213 form or the written request to your Tax Services Office ("TSO") for authorization. The written request or the T1213 must explain why less income tax should be deducted and include all supporting documentation. The TSO may require, as supporting documentation, written confirmation from the LIRSP administrator that the pension contributions were made from income that was exempt from tax.
If the TSO approves the request, they will issue a 'letter of authority' that is then given to you to be given to the LIRSP administrator so that the income tax withheld from the LIRSP withdrawal can be reduced. A 'letter of authority' will generally not be issued in a case where the taxpayer has an outstanding balance or an overdue tax return.
A list of TSOs is available on the CRA website. We have enclosed form T1213 for your convenience.
We trust that these comments will be of assistance.
Yours truly,
Eliza Erskine
A/Manager
Non-Profit Organizations and Aboriginal Issues
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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