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:
Are free travel vouchers provided to clients of a broker as an incentive when they transfer an RRSP to the broker prohibited under 146(2)(c.4) of the Act?
Position:
Yes.
Reasons:
If such an incentive is linked to the issue or existence of an RRSP, it is prohibited even if it is available to other customers.
XXXXXXXXXX 2001-008963
W. C. Harding
August 16, 2001
Dear XXXXXXXXXX:
Re: Paragraph 146(2)(c.4) of the Income Tax Act (the "Act")
This is in reply to your letter of June 18, 2001, in which you asked if the provisions of paragraph 146(2)(c.4) of the Act would apply to an offer of travel vouchers to clients who open an account with a broker in relation to the transfer of funds to an RRSP.
The particular situation outlined in your letter appears to relate to a factual one, involving a specific taxpayer. As explained in Information Circular 70-6R4, it is not this Directorate's practice to comment on proposed transactions involving specific taxpayers other than in the form of an advance income tax ruling. Should your situation involve a specific taxpayer and a completed transaction, you should submit all relevant facts and documentation to the appropriate Tax Services Office for their views. However, we are prepared to offer the following general comments, which may be of assistance.
In your letter, you describe a situation where an incentive will be provided to persons who transfer money from a competitor and possibly to clients who open account even if funds are not transferred from a competitor. The incentive will be given to clients based on their volume of trading and on minimum balances. The incentive will not be dependent upon the transfer of funds into an RRSP but will be given to the annuitant of an RRSP in respect to such transfers.
In your view, the incentive does not constitute an advantage within the meaning of paragraph 146(2)(c.4) of the Income Tax Act (the "Act") when it is provided to an RRSP annuitant since it is not conditional in any way on the existence of the RRSP. In this respect, you referred to the comments made in our letter of September 23, 1993 on file 9325845. As noted by you, in that letter we indicated, that an offer would contravene the provisions of paragraph 146(2)(c.4) of the Act if it is linked in any manner to the issue or the existence of an RRSP. It should also be noted that in that letter, we also indicated that this would be so even if the offer is made available to other customers but that it would not be so if the offer was made available to anyone free of charge and without reference to the making of contributions to an RRSP.
These comments are similar to those found in a number of our opinions. For example, in a letter Dated February 22, 1989, (our file E57539) we state:
"It is the Department's view that offers from RRSP issuers of such things as chances to win trips, free appliances, interest-free loans, etc. to purchasers of their RRSPs are advantages that are prohibited by paragraph 146(2)(c.4) of the Income Tax Act notwithstanding that the customer could obtain the advantage by some other means such as purchasing a GIC, opening a non-RRSP account, etc. On the other hand where an institution offers a chance to win a prize to anyone whether or not that person deals with the institution, it is our view that the institution is not extending any advantage that is conditional on the existence of an RRSP."
In our opinion, if the incentive proposed in your situation will be offered to clients who transfer funds to an RRSP with the broker or who open a new RRSP account with the broker, it will be linked to the RRSP and, accordingly, will be prohibited in accordance with the provisions of 146(2)(c.4) of the Act.
We trust that our comments will be of assistance.
Yours truly,
Roberta Albert, CA
for Director
Financial Industries Division
Income Tax Rulings Directorate
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