CRA treats the members of a partnership as the payers of RCA withdrawals made to the partnership employees for source deduction purposes
A partnership that was the employer respecting a supplementary retirement plan that was a retirement compensation arrangement (RCA) submitted that no withholding should apply to its withdrawal of plan surplus on the basis that, as a partnership, it not taxable under Part I and on the basis that the applicable source deduction Regulation (Reg. 106(1)) indicated that withholding was to be made based on the amount of tax that may reasonably be expected to be payable under the Act by the recipient with respect to the payment.
In rejecting the employer’s position, the Directorate stated that “subsection 96(1) … ensures that the members of the partnership are taxable on their respective share of the partnership’s income” and that in applying Reg. 106(1), “the amount to be withheld from the [withdrawal] Payment should be equal to the total amount of tax that may reasonably be expected to be payable under the Act by the members of the employer partnership with respect to the Payment.”