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 CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues: Can a group RCA track refundable tax by each member for the purpose of computing a refund of Part XI.3 tax?
Position: No.
Reasons: The law clearly defines refundable tax in respect of the RCA arrangement as a whole; it does not contemplate tracking the refundable tax in respect of each member.
XXXXXXXXXX 2001-009573
P. Kohnen
November 6, 2001
Dear XXXXXXXXXX:
Re: Request for technical interpretation - RCAs - Refundable Tax
This is in reply to your initial facsimile submission of August 1, 2001 and your follow-up submission of October 31, 2001, requesting our views regarding the viability of tracking of refundable tax for each individual member of a retirement compensation arrangement ("RCA").
Given your advice that the latter submission best summarizes the essence of your enquiry, we will forego commenting on the contents of the examples submitted with your facsimile of August 1, 2001.
An RCA is defined in subsection 248(1) of the Income Tax Act (the "Act") to be a plan or arrangement under which contributions are made by an employer or former employer of a taxpayer to another person (a "custodian") in connection with benefits that are to be, or may be, received or enjoyed by any person on, after or in contemplation of any substantial change in the services rendered by the taxpayer, the retirement of the taxpayer, or the loss of an office or employment of the taxpayer.
The definition of "refundable tax" in subsection 207.5(1) of the Act refers to "refundable tax of a retirement compensation arrangement". Subsection 207.7(1) of the Act requires a custodian of a retirement compensation arrangement to pay a tax under Part XI.3 of the Act equal to the amount, if any, by which the "refundable tax of the arrangement" has increased in the taxation year. Subsection 207.7(2) of the Act, which provides for a refund of refundable tax, also refers to the "refundable tax of the arrangement".
Clearly, the Act does not contemplate tracking the levels of refundable tax, for the purpose of calculating Part XI.3 tax owing or refundable, other than in respect of an RCA. Nothing in the legislation would provide the ability to track the refundable tax amounts allocated to each member of a group RCA, for purposes of calculating the tax payable or to be refunded.
In regard to the assumptions used in the example you provided in your facsimile of October 31, 2001, it should be noted that the loan of an amount from the employer, to enable the trustee of the RCA to purchase an annuity, could be a contribution that would increase the refundable tax balance at the end of the year. As noted in this Directorate's response to Question 5 at the May 12, 1998 Conference of Advanced Life Underwriting, the Canada Customs and Revenue Agency has considered this issue in only one scenario. In that situation, the employer loaned an amount equal to the refundable taxes to the RCA in order to facilitate the wind-up of the RCA and, as such, the loan was not considered to be a contribution to the RCA. The facts in respect of each situation would have to be reviewed to determine whether a particular loan would constitute a contribution for purposes of Part XI.3 of the Act.
Written confirmation of the tax implications inherent in particular transactions are given by this Directorate only where the transactions are proposed and are the subject matter of an advanced income tax ruling request. Where the particular transactions are completed, the enquiry should be addressed to the relevant Tax Services Office.
We trust that the above comments are of assistance.
Yours truly,
Roberta Albert, C.A.
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