19 January 2000 Internal T.I. 9932577 - RRSP WITHHOLDING REQUIREMENTS

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:

Is there any requirement to withhold income tax when an amount is deemed to have been received out of an RRSP by a deceased annuitant of the RRSP?

Position:

There is no withholding of income tax required under Part 1 of the Act but there is under Part XIII of the Act (if it is applicable) by virtue of paragraph 214(3)(a) of the Act.

Reasons:

The law does not require withholding under Part 1 of the Act. [Note amounts paid out that are in excess of the deemed benefit may be treated differently.]

		January 19, 2000

	WINNIPEG TSO	HEADQUARTERS
	Revenue Collections	W.C. Harding
(613) 957-8953
	Attention: Dian Versluis
		1999-001463

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Requirements to Withhold Income Tax
On Subsection 146(8.8) Deemed Benefit

This is in reply to your memorandum of December 9, 1999, in which you asked us to answer three questions posed in relation to the payment of amounts out of an RRSP after the death of the last annuitant of an unmatured RRSP. The questions were as follow:

1. Does the word "payee" as used in subsection 153(1) of the Income Tax Act (the "Act") refer to a deceased annuitant who, by subsection 146(8.8) is deemed to have received the benefit referred to in subsection 146(8.8)?

2. Does the Canada Customs and Revenue Agency (the "Agency") consider the payments in question to be subject to the withholding provisions under subsection 153(1) of the Act?

3. If so, why were no amounts withheld with respect to the above-noted estate?

Our Comments:

Pursuant to subsection 146(8.8), a deceased annuitant of an unmatured RRSP will be deemed to have received an amount as a benefit out of or under a registered retirement savings plan immediately before the annuitant's death. The provision will require the annuitant to include the deemed amount in income for the year of death. However, this provision does not deem the issuer to have made a payment to the annuitant, or anyone else. Therefore , because the withholding provisions in subsection 153(1) apply to a person paying a payment out of or under an RRSP, subsection 146(8.8) cannot be used to require the issuer of the RRSP to withhold and remit a proportion of the benefit deemed to be received by the deceased annuitant.

In contrast, for the purposes of part XIII of the Act [Tax on Non-Resident's Income from Canada], paragraph 214(3)(c) of the Act specifically provides that where, because of subsection 146 (8.8) of the Act, an amount would, if Part I applied, be required to be included in computing a taxpayer's income, that amount shall be deemed to have been paid to the taxpayer as a payment under a registered retirement savings plan or an amended plan. By virtue of subsection 214(3.1) of the Act the deemed payment is deemed to have been paid immediately before the death of the annuitant.

Where a person has received an amount from an RRSP that represents the deemed benefit to the annuitant pursuant to subsection 146(8.8), that amount is excluded from the definition of "benefit" and is not included in the recipient's income. However, the recipient is jointly liable, pursuant to subsection 160.2(1) of the Act, with the deceased annuitant to pay the additional tax of the deceased annuitant that resulted from the application of subsection 146(8.8).

Accordingly, the answers to questions 1 and 2 are as follow:

1. The provisions of subsection 153(1) of the Act are not applicable to the annuitant in the circumstances so the word "payee" as used in the section does not refer to the deceased annuitant; and

2. The Agency does not consider the payments in question to be subject to the withholding provisions under subsection 153(1) of the Act.

P. Spice
for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch

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