14 September 1994 Internal T.I. 9415316 - WITHHOLDING REQUIREMENTS ON EXCESS TRANSFER FROM RPP

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

Is withholding applicable on transfers from RPPs to other registered plans in excess of amounts permitted on tax free basis.

Position TAKEN:

Yes

Reasons FOR POSITION TAKEN:

Legislation

			September 14, 1994
	Head Office	Head Office
	Source Deductions Division	Rulings Directorate
	District Office and Taxation 	(613) 957-8953
	Centre Support Services	D. Duff
	Attention:  R. Cousineau
			7-941531

Withholding Requirements on Excess Transfers between Registered Plans

This is in response to your memorandum of June 10, 1994, requesting our opinion on whether amounts transferred from RPPs to RRSPs or RRIFs, that are in excess of the amounts that can be transferred on a tax sheltered basis, are subject to withholding tax.

Amounts included in income

Transfers from registered pension plans to other registered plans done pursuant to subsections 147.3(1) to 147.3(8) of the Act are not, pursuant to subsection 147.3(9) of the Act, to be included in income. Where transfers are not in accordance with subsections 147.3(1) to 147.3(7), such amounts are deemed by virtue of subsection 147.3(10) "to have been paid from the transferor plan to the individual". Where only part of the transferred amount is in accordance with subsections 147.3(1) to 147.3(8), subsection 147.3(11) provides that subsection 147.3(9) applies to that part and 147.3(10) applies to the amount that is not. This latter amount is referred to as the "excess amount" in this letter and it must be included in the income of the individual by virtue of subparagraph 56(1)(a)(i) of the Act as a superannuation or pension benefit (discussed below). Also note that the deeming provision in subsection 147.3(10) of the Act has no restriction on its application, consequently, we interpreted it as a deeming provision for the entire Act.

Withholding

A superannuation or pension benefit is defined in subsection 248(1) as including "any amount received out of or under a superannuation or pension fund or plan and ...includes any payment made to the beneficiary...". Paragraph 153(1)(b) requires any person paying a superannuation or pension benefit to withhold amounts as prescribed. Subsection 100(1) of the Regulations define remuneration to include a superannuation or pension benefit and an employer and an employee, respectively, as any person paying and receiving remuneration. Subsection 100(4) of the Regulations applies to lump sum payments by employers to employees and paragraph 100(6)(a) of the Regulations defines lump sum to include payments from pensions as defined in subparagraphs 40(1)(a)(i) of the Income Tax Application Rules. This provision refers:

"to a payment

(i) out of or pursuant to a superannuation or pension fund or plan

(A) upon the death, withdrawal or retirement from employment of an employee or former employee,
(B) upon the winding-up of the fund or plan in full satisfaction of all rights of the payee in or under the fund or plan, or
(C) to which the payee is entitled by virtue of an amendment to the plan although he continues to be an employee to whom the plan is applicable."

In most cases, these would be the situations for transferring amounts pursuant to section 147.3. Consequently, excess amounts, referred to above, would also be lump sum payments subject to the provisions in subsection 100(4) of the Regulations.

Summary

In our opinion, excess amounts are superannuation or pension benefits which are deemed to be paid to the individual by the pension plan. Providing such excess amounts also meet the definition of lump sum payments in paragraph 100(6)(a) of the Regulations, they are subject to the withholding requirements in subsection 100(4) of the Regulations.

for Director
Financial Industries Division
Rulings Directorate