21 July 1993 External T.I. 9318785 F - Bundesbank Bonds for RRSP Investment

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.

XXXXXXXXXX 

Attention:  XXXXXXXXXX

Dear Sirs:

RE:  Qualified Investments and Foreign Property

This is in reply to your letter of June 18, 1993, in which you ask whether Deutschmark Bonds issued by the Bundesbank of Germany are qualified investments and foreign property for a registered retirement savings plan (RRSP) trust.

Whether a property is a qualified investment or foreign property within the meaning of the Income Tax Act (the "Act") is a question of fact which can only be determined at the time a RRSP trust acquires the particular property. We are unable, therefore, to provide you with an answer to your query. We can provide the following general comments, however.

Qualified investments for RRSP's are listed in paragraph 146(1)(g) of the Act and include those properties prescribed in sections 4900, 4901 and 5100 through 5104 of the Income Tax Act Regulations (the "Regulations").

As announced in a Press Release on June 21, 1993, the Department of Finance intends to amend the Regulations to include the following investments which will qualify for RRSP purposes:

1.     Debt obligations of corporations whose shares are listed on a prescribed foreign stock exchange; and

2.     debt obligations of foreign governments which, at the time of purchase, have an "investment grade" rating with a bond rating agency that ordinarily rates debt issued by foreign governments.

It is proposed that these amendments, when enacted, will have effect from June 21, 1993.

In addition, RRSP trusts are subject to limitations on the amount of foreign property they can hold without being subject to a penalty tax. Most bonds issued by foreign persons will be foreign property within the meaning of section 206 of the Act. An exception is made for bonds issued by a non-resident person if the bond is issued or guaranteed by the International Bank for Reconstruction and Development, the International Finance Corporation, the Inter-American Development Bank, the Asian Development Bank, or the Caribbean Development Bank.

Bonds denominated in foreign currency but issued by a resident corporation or a Canadian, provincial or local government are not foreign property.

Unless the bonds issued by the Bundesbank of Germany are guaranteed by one of the banks named above, they will be foreign property for RRSP purposes.

Although the foregoing comments are not binding on the Department, we trust they are helpful.

Yours truly,

for DirectorFinancial Industries DivisionRulings Directorate