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.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
1)RRSP & RRIF admin fees;
2)RRSP & RRIF investment management fees;
3)RPP (money purchase) admin fees and investment management fees.
Position:
1)Confirming new position that administration fees paid inside RRSP or RRIF trust do not constitute benefit or amount received to annuitant;
2)Confirming old position that investment management fees paid by annuitant are considered payment of a premium to RRSP but not a gift to RRSP for section 146 and Part X.1 purposes; and that payment of such RRIF expenses by annuitant is forbidden by 146.3(2)(f) and would cause income inclusion under 146.3(11);
3)Confirming Finance's position that both types of fees may be paid out of plan funds.
Reasons:
1)Using trust funds to pay admin. fees is not a "benefit received" by the annuitant;
2)routine;
3) reference to Tech Notes of 31/7/91 re payment by plan of admin, investment and similar expenses.
963156
XXXXXXXXXX P. Spice
Attention: XXXXXXXXXX
October 3, 1996
Re: Administration Fees, Investment Management Fees:
Registered Retirement Savings Plan ("RRSP")
This is in reply to your letter of August 23, 1996, in which you ask us to clarify our position on the payment of the above-noted fees with respect to an RRSP and a money purchase registered pension plan ("RPP"). A description of the fees and the tax consequences flowing from the method of payment follow. Our interpretation concerning the payment of RRSP administration fees relates to the proposed amendments to the Income Tax Act (the "Act") as announced in the Budget Speech on March 6, 1996 and is restricted to such payments made after March 5, 1996. We also provide our comments concerning fees for a registered retirement income fund ("RRIF").
A.ADMINISTRATION FEES FOR RRSP AND RRIF
1.Description: Administration fees relate to the overall direction and management of the affairs of the RRSP or RRIF trust and relate to the normal services provided by an RRSP trustee or RRIF carrier. They are also sometimes referred to as trustee fees.
2.Method of Payment:
By annuitant - where the RRSP or RRIF annuitant pays the administration fees after March 5, 1996, no deduction will be allowed. The payment will not be considered the payment of a premium to the RRSP, nor a gift to an RRSP for purposes of Part X.1 of the Act.
By RRSP or RRIF trust - where funds inside the RRSP or RRIF are used to pay the administration fees, it is our view that no benefit or amount is received by the annuitant as a consequence.
B.INVESTMENT MANAGEMENT FEES FOR RRSP AND RRIF
1.Description: These are expenses relating to the administration or management of the property in an RRSP or RRIF trust. For more information please refer to the description in paragraph 4 of Interpretation Bulletin IT-238R2 (e.g., fees relating to the manager's services of providing custody of securities, maintenance of accounting records, and collection and remittance of income).
2.Method of Payment:
By RRSP or RRIF trust - these fees are properly expenses of the trust and when paid with trust funds there are no tax consequences to the annuitant.
By the annuitant - this payment of the RRSP trust expenses will constitute the payment of a premium to the RRSP for purposes of section 146 and Part X.1 of the Act. Payment of RRIF trust expenses by the annuitant is prohibited by paragraph 146.3(2)(f) of the Act. If such a payment is made, in the year the payment is made there will be an income inclusion to the annuitant equal to the fair market value of the RRIF property pursuant to subsection 146.3(11) of the Act.
C.ADMINISTRATION AND INVESTMENT MANAGEMENT FEES FOR MONEY PURCHASE RPP
As indicated in the July 31, 1991, Technical Notes to paragraph 8502(d) of the Income Tax Regulations, a plan may provide for the payment of all reasonable administrative, investment and similar expenses incurred in connection with it. We have not considered your proposed arrangement and would require more information, possibly in the form of a request for an advance income tax ruling, before taking a position on it.
We trust our comments will be of assistance to you.
Yours truly,
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
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