15 February 2000 External T.I. 1999-0015725 - WAIVER TO EXCEED RRSP LIMIT

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: Can we provide a waiver to allow a taxpayer to contribute more to an RRSP than the taxpayer is entitled to under the Act?

Position: No.

Reasons: No provision in the Act allows us to provide this waiver of the over-contribution tax.

XXXXXXXXXX 1999-001572
M. P. Sarazin
February 15, 2000

Dear Sir\Madam:

Re: Waiver to Exceed RRSP Deduction Limit

This is in response to your letter dated December 16, 1999, wherein you requested a waiver to allow you to contribute amounts in excess of your RRSP deduction limit to your RRSP.

You resigned from your former employment and are considering withdrawing your pension entitlements from your former employer's registered pension plan ("RPP"). The RPP administrators have advised you that a certain amount of your pension entitlements under the RPP will have to be transferred to a locked-in retirement plan and the balance of your entitlements will be paid out in cash (the "Excess Amount"). The RPP administrator will transfer all or a portion of the Excess Amount equal to your RRSP deduction limit to your RRSP. Since you do not have a balance in your RRSP deduction limit, you have asked us to provide a waiver allowing the RPP administrator to transfer an amount to your RRSP.

Comments

The enclosed Interpretation Bulletin IT-124R6 (Contributions to Registered Retirement Savings Plans) will provide you with the Canada Customs and Revenue Agency's general views regarding the determination of the maximum amount that can be deducted by an individual in respect of his or her contributions to an RRSP. We note that a contribution will include any amount contributed by you and any contribution made on your behalf, as in the case where the RPP administrator pays your Excess Amount entitlement directly to your RRSP. Paragraph 5 of IT-124R6 discusses the computation of the maximum amount that a taxpayer may deduct for contributions to an RRSP in computing his or her income for a year. Where an individual contributes more than his or her RRSP deduction limit to an RRSP, the over-contribution may be subjected to tax under Part X.1 of the Income Tax Act (the "Act") and, in this regard, please refer to the general comments provided in paragraph 6 of IT-124R6. (Note paragraph 30 of IT-124R6 contains an out-dated description of the calculation of the over-contribution subject to Part X.1 tax . For an up-to-date description of the calculation, please refer to the enclosed form T1-OVP.) Paragraphs 8 and 9 of IT-124R6 discuss the computation of a taxpayer's RRSP deduction limit.

If your RRSP deduction limit is nil, then you will not be able to contribute any of the Excess Amount received from your former Employer's RPP to your RRSP and the RPP administrator will not be able to transfer any of the Excess Amount to your RRSP on your behalf without the contribution or transfer being subjected to tax under Part X.1 of the Act. We note that there is no provision in the Act that allows us to provide a waiver for Part X.1 tax except after the fact in the circumstances (which are not relevant here) of an over-contribution arising as a consequence of reasonable error as set out in subsection 204.1(4) of the Act.

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

Yours truly,

Patricia Spice
for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy & Legislation Branch

ENCLOSURE