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: Whether the withholding tax on an early withdrawal from a locked-in retirement account as approved by the Financial Services Commission of Ontario must be calculated on 1) the aggregate of the approved distributions, namely the "Specified Amount" and the Fee payable to the commission in respect of the application for permission to make an early withdrawal or, 2) can the appropriate rate of withholding tax be determined by the quantum of the Specified Amount and the Fee as two separate calculations?
Position: The rate of withholding tax must be calculated by reference to the total of all amounts approved for early distribution.
Reasons: The approval granted by the Ontario Financial Services Commission is for one distribution in respect of the particular application - subject to concurrence by Trust Accounts Division which has responsibility for the administration of the withholding or source deduction provisions of the Act.
June 23, 2000
Individual Returns and Payments Head Office
Processing Directorate Income Tax Rulings Wayne Ganim, Director General Directorate
Attention: Pierre Beaudry, G. Kauppinen
Pensions & Trusts Section (613) 957-8971
2000-002940
Withholding on Early Withdrawals from a "Locked-in Retirement Account"
This is in reply to your facsimile dated June 1, 2000 regarding withholdings on amounts paid from a locked-in retirement account. These amounts are approved for withdrawal from a locked-in retirement account by the Superintendent of the Financial Services Commission of Ontario by reason of financial hardship of the annuitant.
Specifically, the amounts approved for withdrawal are the "Specified Amount" and the fee payable to the Ontario Minister of Finance by the annuitant in respect of the application for the early withdrawal (the "Fee"). Both amounts are net of the required withholding tax. The withholding tax is also an approved withdrawal from the locked-in retirement account.
The client is correct in her calculation of the required withholding tax, that is, a percentage of the "grossed-up amount" which, after the appropriate withholding tax is calculated and deducted therefrom, will yield the Specified Amount and the Fee. The grossed-up amount is the amount that the annuitant of the locked-in retirement account will be required to include in income for tax purposes for the year in which the withdrawal is made.
The client's specific question is whether the appropriate percentage of the grossed-up Specified Amount and Fee that is required to be withheld as tax can be calculated as two separate withdrawals or, must the amount of withholding tax be calculated on the Specified Amount and the Fee aggregated together.
In our opinion, the withholding tax rate is determined on the basis that it is the total of all amounts approved for withdrawal by the Superintendent that is the relevant amount and not each component thereof considered separately. However, since the administration of the withholding or source deduction provisions is the responsibility of the Trust Accounts Division, you may wish to refer this query to Marc Normand, Manager, Policy and Technical Services Section, Revenue Collections Directorate for his consideration.
We trust the foregoing is of assistance. If there are further questions, please contact Gord Kauppinen at (613) 957-8971.
Patricia Spice
Manager
Deferred Income Plans Section
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