8 June 1995 Internal T.I. 9328187 F - Withdrawals From RRSPs by Status Indians

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:

Taxation of withdrawals from RRSPs by status Indians.

POSITION TAKEN:

Based on Williams v. Her Majesty the Queen, 92 DTC 6320, [1992] 1 CTC 225, the Department is of the view that when payments from an RRSP relate to income that was exempt from tax, the payments will usually be exempt from tax.  If only a portion of the payments relate to income that was exempt, then the exemption will be prorated.

REASONS FOR POSITION TAKEN:

In Williams, the Supreme Court rejected the situs of the debtor test as the sole test for determining whether the personal property of an Indian was situated on a reserve.  The approach adopted in Williams requires an examination of all factors connecting income to a reserve to determine if the income is located on the reserve.

June 8, 1995

London Tax Services     HEADQUARTERSReview and Control - Enquiries     M. AzziRevenue Collections Division     957-8953

Attention:  D. Brochu

Withdrawals from RRSPs by Status Indians

This is in reply to your memo of June 7, 1993 to Mr. Ray Cousineau of Source Deductions Division, concerning an enquiry from the XXXXXXXXXX regarding the taxation of withdrawals from RRSPs by status Indians. We apologize for the unavoidable delay that has been encountered in replying to your request.  In light of the decision of the Supreme Court of Canada in Williams v. Her Majesty the Queen, 92 DTC 6320, [1992] 1 CTC 225, the Department has had to review its interpretation of the scope of the exemption from income taxation provided under the Indian Act.

Our Comments

The Department's previous position was that, if payments out of an RRSP were made from an institution whose head office was located on a reserve, the payments should be exempt from tax.  In light of Williams, however, this view is no longer appropriate.

One general direction provided in Williams was that "an overly rigid test which identified one or two facts as having controlling force...would be open to manipulation and abuse". The Supreme Court rejected the situs of the debtor test as the sole test for determining whether the personal property of an Indian was situated on a reserve.  The approach adopted in Williams requires an examination of all factors connecting income to a reserve to determine if the income is located on the reserve.

Based on the guidance provided in Williams, the Department has reviewed its position on RRSPs.  As a result of our review, we are of the view that when payments from an RRSP relate to income that was exempt from tax, the payments will usually be exempt from tax.  If only a portion of the payments relate to income that was exempt, then the exemption will be prorated.  This position is the same as the position for registered pension plan benefits, unemployment insurance benefits and Canada Pension Plan payments reflected in the Indian Act Exemption for Employment Income Guidelines issued in June, 1994.

We trust that these comments will be of assistance.

R. Albert for DirectorBusiness and General DivisionIncome Tax Rulings and Interpretations DirectoratePolicy and Legislation Branch

c.c.     R. Cousineau     Source Deductions Division