12 December 1996 External T.I. 9637445 - RRSP ADMINISTRATION FEES PAID BY EMPLOYER

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:

Where the employer pays the annual administration fee for it's employee, will it be an employment benefit to the employee?

Position:

The payment will be considered an employment benefit and taxable to the employee under paragraph 6(1)(a) of the Act. However, the payment will not be considered the payment of a premium to the RRSP, nor a gift to an RRSP for purposes of Part X.1 of the Act.

Reasons:

The expense is the employees and if paid by the employer it is an employment benefit. It is not a premium or gift to the RRSP becuse it is an expense of the employee not of the RRSP trust. The employer is not a party of the RRSP Agreement which is between the RRSP Issuer and the Annuitant, other than as agent for group RRSP plans.

									5-963744
XXXXXXXXXX							Franklyn S. Gillman

Attention: XXXXXXXXXX

December 12, 1996

Dear Sirs:

Re: RRSP Administration Fees

This is in reply to your letter of November 11, 1996, in which you ask us to clarify our position on the payment of the above-noted fees with respect to an RRSP. Our interpretation concerning the payment of administration fees relates to the proposed amendments to the Income Tax Act (the "Act") as announced in the Budget Speech on March 6, 1996 and is restricted to such payments made after March 5, 1996.

Administration fees relate to the overall direction and management of the affairs of the RRSP trust and relate to the normal services provided by an RRSP trustee. They are also sometimes referred to as trustee fees.

Method of Payment:

1.By annuitant

Where the RRSP annuitant pays the administration fees after March 5, 1996, no deduction will be allowed. The payment will not be considered the payment of a premium to the RRSP, nor a gift to an RRSP for purposes of Part X.1 of the Act.

2.By RRSP

Where funds inside the RRSP are used to pay the administration fees, it is our view that no benefit or amount is received by the annuitant as a consequence thereof.

3. By the Employer

Where the employer pays the annual RRSP administration fees on behalf of the annuitant (employee), the payment will be considered an employment benefit and taxable to the employee under paragraph 6(1)(a) of the Act. However, the payment will not be considered the payment of a premium to the RRSP, nor a gift to an RRSP for purposes of Part X.1 of the Act.

These opinions are our best interpretation of the law as it applies generally. They may, however, not always be appropriate in the circumstances of a particular case. As stated in paragraph 21 of Information Circular 70-6R2 written opinions are not advance rulings and, accordingly, are not binding on the Department.

We trust these comments will be of assistance.

Yours truly,

for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch