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.
Principal Issues: Whether a loan from a registered plan secured by real property is an advantage pursuant to subparagraph (b)(ii) of the definition of the word in subsection 207.01(1).
Position: Question of fact.
Reasons: Question of fact.
XXXXXXXXXX 2023-100192
Kah Foo Koh
June 1, 2026
Dear XXXXXXXXXX:
Re: Secured Mortgage Loan from RRSP – Advantage
We are writing in response to your inquiry of December 15, 2023, in which you requested our views on whether a controlling individual of a registered retirement savings plan (“RRSP”) borrowing money from the RRSP (“Mortgage Loan”) could result in an advantage pursuant to clause (b)(ii)(A) of the definition of “advantage” in subsection 207.01(1) . We apologize for the delay in our response.
Your inquiry incorporated the hypothetical scenario described in technical interpretation 2015-0601211E5 with the additional assumptions that the Mortgage Loan would be made on commercial terms that are consistent with substantially similar loans made between arm’s length parties in Canada, and that the borrower would not default on the Mortgage Loan or fail to make any requisite payments under the Mortgage Loan on a timely basis.
It is your view that the reference in clause (b)(ii)(A) of the definition of “advantage” in subsection 207.01(1) to “a payment received as, on account or in lieu of, or in satisfaction of, a payment […] for services provided by a person who is, or who does not deal at arm’s length with, the controlling individual of the registered plan” can encompass employment income earned by the controlling individual of the RRSP through provision of services to an arm’s length employer that is included in the taxable income of the controlling individual.
Regardless, you contend that the Mortgage Loan would not result in an “advantage” pursuant to clause (b)(ii)(A) of the definition of “advantage” in subsection 207.01(1) because a payment of interest and principal on the Mortgage Loan would not result in an increase in the total fair market value (“FMV”) of property held in connection with the RRSP and would not be a benefit even if such payment can be attributable, directly or indirectly, to employment income described above.
Our Comments
This technical interpretation provides general comments about the provisions of the Act and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R12, Advance Income Tax Rulings and Technical Interpretations.
As discussed in technical interpretation 2015-0601211E5, the granting of a Mortgage Loan may be an advantage by virtue of paragraph (a) of the definition of “advantage” in subsection 207.01(1) unless the exception provided by subparagraph (a)(ii) of that definition applies. Moreover, while the granting of a Mortgage Loan in and of itself would not result in a decrease of the FMV of the property of the RRSP immediately thereafter, an RRSP strip might arise after the granting of a Mortgage Loan under certain conditions such as those described in technical interpretation 2015-0601211E5.
Clause (b)(ii)(A) of the definition of “advantage” in subsection 207.01(1) refers to a benefit that is an increase in the total FMV of the property held in connection with an RRSP if it is reasonable to consider, having regard to all the circumstances, that the increase is attributable, directly or indirectly, to a payment received as, on account or in lieu of, or in satisfaction of, a payment for services provided by a person who is, or who does not deal at arm’s length with, the controlling individual of the registered plan. It is a question of fact as to whether the conditions described in clause (b)(ii)(A) of the definition of “advantage” in subsection 207.01(1) are met in any given situation. However, we are prepared to offer the following general comments, which may be of assistance.
In our view, there may be circumstances where mortgage interest payments made to an RRSP in respect of a Mortgage Loan could result in an increase in the total FMV of property held in connection by the RRSP, and such an increase would be a benefit with respect to the RRSP.
Moreover, depending on the facts and circumstances in a given situation, this increase may potentially be attributable, directly or indirectly, to a payment received as, on account or in lieu of, or in satisfaction of, a payment for services provided by the controlling individual of the RRSP or a person who does not deal at arm’s length with such individual.
Subparagraph (b)(ii) of the definition of “advantage” in subsection 207.01(1) targets arrangements that attempt to artificially shift otherwise taxable amounts into a registered plan. For example, where employment income of a controlling individual of an RRSP is replaced or the quantum of such employment income is reduced, there may be an artificial shift of taxable income into the RRSP. In determining whether a payment to a registered plan has been received in substitution for a payment for services rendered, the economic substance of the related transactions regardless of their legal form have to be considered.
In addition, it is possible that the benefit that is an increase in FMV of the property held in connection with an RRSP from the interest payments may also be an advantage pursuant to subparagraph (b)(i) of the definition of “advantage” in subsection 207.01(1) if the interest payments would not occur in a normal commercial or investment context where parties are dealing at arm’s length and that have, as one of its main purposes, to enable a person or partnership to benefit from the exemption from Part I tax. As with clause (b)(ii)(A) of the definition of “advantage” in subsection 207.01(1), whether the requirements in subparagraph (b)(i) of that definition are satisfied in any given situation is a question of fact, and dependent on the particular circumstances.
We would be pleased to consider your question in the context of an advance income tax ruling request should you decide to proceed with such a request.
Yours truly,
Irina Schnitzer
Manager
for Division Director
Financial Industries and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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