12 November 2002 External T.I. 2002-0170025 - TAXATION OF INDIAN RPP ROLLED TO RRIF

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:

Does tax-exempt status apply to payments to a status Indian from her RRIF?

Position: Question of Fact.

Reasons:

If RRIF funds originated as an RPP entitlement related to tax-exempt employment income, the Guidelines exempt both principal & investment income paid to a status Indian from taxation.

2002-017002
XXXXXXXXXX Renée Shields
(613) 948-5273
November 12, 2002

Dear XXXXXXXXXX:

Re: Tax Exempt Status of RRIF Payments

This is in response to your facsimile of October 14, 2002 addressed to the Toronto Centre Tax Services Office inquiring about whether registered retirement income fund (RRIF) payments to a status Indian are tax-exempt. Your facsimile was forwarded to the Income Tax Rulings Directorate on October 23, 2002.

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 submitted in the manner set out in Information Circular 70-6R5, Advanced Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant tax services office. The following comments are, therefore, of a general nature only and are not binding on the Canada Customs and Revenue Agency ("CCRA"). All publications referred to herein can be accessed on the CCRA website at the following address: http://www.ccra-adrc.gc.ca/tax/technical/incometax/menu-e.html.

The CCRA's position concerning the taxation of pension income of a status Indian is reflected in the Indian Act Exemption for Employment Income Guidelines. In short, income that is ancillary to employment income, such as pension income and Canada Pension Plan benefits, is treated the same as the employment income itself. In other words, if the employment income earned by a status Indian was exempt from taxation under paragraph 81(1)(a) of the Income Tax Act (the "Act") and section 87 of the Indian Act, any pension benefits relating to that exempt employment income that are received by the status Indian will also be exempt from tax. Any pension benefits paid to a status Indian beneficiary of the particular status Indian subsequent to his or her death would also be exempt from tax.

When the amounts held in a RRIF relate to amounts transferred from a registered pension plan which in turn related to tax-exempt employment income, the CCRA's position is that payments of both principal and investment income from these RRIFs will usually be exempt from tax.

Please also note that the normal withholding requirements apply to RRIF payments even when they are made to a status Indian. To be exempted from the applicable withholding taxes, the status Indian annuitant must apply for a waiver from his or her Tax Services Office. You are not entitled to reduce the applicable withholding taxes until the status Indian annuitant has provided you with an appropriate CCRA waiver covering the payments in question. In all cases, the amount must be reported on the T4RIF.

We trust that these comments will be of assistance.

Yours truly,

Mickey Sarazin, C.A.

for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch