21 December 1992 Income Tax Severed Letter 9231357 - Indians and RRSPs and Retiring Allowances

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.

December 21,
1992

SASKATOON DISTRICT OFFICE Business and
General
Colleen Mah, Chief Division
Enquiries Division Glen Thornley
(613) 957-2101
923135

Re: Registered Retirement Savings Plan ("RRSP") and Status Indians

This is in reply to your letter of October 19, 1992 asking whether payments received out of an RRSP or a RRIF by a Status Indian are considered exempt income to the Status Indian.

Our Comments

In order for a payment to be non-taxable to a Status Indian it must be personal property of the Indian on a reserve. In this respect payments under an RRSP or a RRIF are considered sourced at the head office of the financial institution that issued them and are, therefore, not sourced on a reserve unless, of course, the head office of the financial institution (credit union, trust company, etc) happens to be situated on a reserve. Where this is the case the RRSP payments would be considered as personal property of an Indian on a reserve and exempt from taxation by virtue of section 87 of the Indian Act and paragraph 81(1)(a) of the Income Tax Act. Additionally, RRSP payments are not covered by the Indian Remission Order as the Order refers only to a superannuation or pension benefit under a registered pension fund or plan. An RRSP is a savings plan, not a superannuation or pension plan or fund. With respect to your question about a status Indian purchasing an RRSP or RRIF with exempt income, there does not appear to be any prohibition in the definition of Earned Income against using exempt income in that calculation. However, as you indicate, such income would lose its identity and where the benefits were paid from an off- reserve location they would be taxable in the hands of a status Indian. However, the receipt of a lump-sum payment out of a pension plan or a retiring allowance may or may not result in exempt income. Where the employer is resident on the reserve and the recipient is a status Indian such payments would normally be exempt from income taxes. Similarly, where the employer is not on a reserve but the payments are related to services performed on a reserve, the Indian Remission order would cause the tax on such payments to be remitted.

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We trust our comments will be of assistance to you.

E. Wheeler
for Director
Business and General Division
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch