14 May 1990 Administrative Letter 900566 F - Deductibility of Employer Contributions under an RCA

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.

19(1)

May 14, 1990

Dear Sirs:

Re:  Deductibility of Employer Contributions under a Retirement Compensation Arrangement ("RCA")

This is in reply to your letter of April 25, 1990 concerning the above-mentioned subject.

You describe the following RCA plan:

-      both employees and employer are beneficiaries;

-      amounts are to be paid out by the custodian as follows:

-      employees would receive 50% of the employer's contribution plus  an amount equal to the 100% of the RCA's income for tax purposes.

-      the employer would receive 50% of its contributions.  This       represents the portion of the contribution that was paid as refundable tax.

It is our view that the portion of contributions paid by the employer as a refundable tax under subsection 207.5(1) of the Income Tax Act (the "Act") is deductible to the employer pursuant to paragraph 20(1)(r) of the Act provided that the amounts are not paid as part of a series of payments and refunds of contributions under the arrangement.  It should also be noted that any amounts received by the employer under the arrangement are included in the employer's income pursuant to paragraph 12(1)(n.3) of the Act.

We trust the above comments will be of assistance to you.

Yours truly,

Wayne Douglas for DirectorFinancial Industries DivisionRulings Division