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 vacation pay a "lump-sum, bonus or retroactive payment" as contemplated by subsection 100(3.2) of the Regulations?
Position: No
Reasons: Reversal of position in E9925045.
XXXXXXXXXX 2001-007227
S. E. Thomson
March 8, 2001
Dear XXXXXXXXXX:
Re: Vacation pay transferred to an RRSP
On October 25, 1999 we wrote a letter to you (our document number E9925045) concerning the direct transfer of vacation pay to an employee's RRSP. In that letter, we stated that vacation pay was considered to be a "bonus or retroactive payment", and therefore was subject to the $10,000 limit in subsection 100(3.2) of the Income Tax Regulations (the "Regulations").
It has been brought to our attention that this is not correct. We are writing to inform you that we do not consider a payment of vacation pay to be a bonus or retroactive payment. Accordingly, the restriction in subsection 100(3.2) of the Regulations for payments over $10,000 does not apply. In other words, a direct payment of vacation pay by an employer to an employee's RRSP will not require income tax withholdings, without regard for the amount of the payment.
Note, however, that the other comments in the October 25, 1999 letter still apply. In particular, contributions in excess of the employee's RRSP deduction limit may be subject to Part X.1 penalty tax, and vacation pay paid to the employee (i.e., not transferred directly to the RRSP by the employer) will require withholdings unless the employee obtains a letter of authority.
We regret any inconvenience this may have caused.
Yours truly,
Roberta Albert, CA
for Director
Financial Industries Division
Income Tax Rulings Directorate
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 2001
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 2001
Email this Content