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:
Whether the purchase of an annuity in the year of retirement in the name of an employee in order to satisfy the obligations of the employer pursuant to an unregistered supplemental retirement plan (the "Plan") results in the employee being taxed on the value of the annuity contract in the year of receipt.
Position TAKEN: Yes
Reasons:
It is not an SDA nor a RCA since the employer did not acquire an interest in the annuity.
XXXXXXXXXX 2003-018117
Cornelis Rystenbil, CGA
January 30, 2003
Dear XXXXXXXXXX:
Re: Supplemental retirement benefits
This letter is in response to your facsimile dated January 2, 2003 in which you ask whether the purchase of an annuity in the year of retirement in the name of an employee in order to satisfy the obligations of the employer pursuant to an unregistered supplemental retirement plan (the "Plan") results in the employee being taxed on the value of the annuity contract in the year of receipt.
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, Advance Income Tax Rulings, dated May 17, 2002. Since the particular transactions are completed, your 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").
Generally, where an employer promises to pay an amount in the future under a supplemental retirement plan, the employee would not be taxed on that amount until received. Where an employer arranges the funding of the future payments through the purchase of an annuity contract in the name of the employee, the employee would be subject to taxation on the value of the annuity in the year it is purchased by the employer.
We trust our comments will be of assistance to you.
Yours truly,
Mickey Sarazin, CA
for Director
Financial Industries Division
Income Tax Rulings Directorate
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