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.
Are employer contributions to an employee RRSP exempt from withholding tax?
Paragraph 100(3)(c) of the Income Tax Regulations.
Randy Hewlett, B.Comm
July 27, 2001
Re: Employer Contributions To An Employee RRSP
We are writing in response to your letter dated May 16, 2001, wherein you requested our opinion on the application of the withholding requirements under the Income Tax Act (the Act) and the Income Tax Regulations (the Regulations) where:
Pursuant to an Agreement between the employer and its employees, the employer makes contributions on behalf of its employees to the "Fonds de so1idarite des travailleurs du Quebec," who in turn, contributes the amount to an individual RRSP for each employee. Such contributions are made directly by the employer, and the employee does not receive such amount.
In your view the contributions are a taxable benefit pursuant to subsection 5(1) and paragraph 6(1)(a) of the Act. However, pursuant to subsection 100(3) of the Regulations and paragraph 2.22 of the Employer's Guide To Taxable Benefits 2000-2001, income taxes do not have to be withheld at source for the contributions.
The situation presented appears to be based on an actual fact situation that is either ongoing or completed. Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. However, we are prepared to offer the following general comments.
Paragraph 6(1)(a) requires an employee to include in income the value of "benefits of any kind whatever" received by virtue of his or her office or employment. An employer's contribution to an employee RRSP would be such a benefit and taxable in the year the contribution is made. However, paragraph 100(3)(c) of the Regulations does not require an employer to withhold income tax from remuneration to an employee which is a premium under a RRSP, where the employer deducts or withholds such payment from an employee's remuneration, and has reasonable grounds to believe that the premium is deductible by the employee as:
1. a transfer of superannuation benefits deductible under paragraph 60(j.1) of the Act,
2. a RRSP premium deductible under subsection 146(5) of the Act or
3. a spousal RRSP premium deductible under subsection 146(5.1) of the Act.
We trust our comments will be of assistance to you.
John Oulton, CA
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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