30 March 1998 External T.I. 9806355 - RRSP FEES

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:

Must fees charged on transfer of an RRSP between financial institutions be paid out of the RRSP funds.

Position TAKEN: No.

Reasons FOR POSITION TAKEN: Specific application of our position.

XXXXXXXXXX 		980635
W. C. Harding

March  30, 1998

Dear XXXXXXXXXX:

Re: RRSP and RRIF Fees

This is in reply to your letter of December 16, 1997 concerning the payment of fees charged by a financial institution on the transfer of a registered retirement savings plan from the financial institution to another financial institution..

If the fee being charged is related to the disposition of a property held in an RRSP then it is appropriate for the fee to be paid out of funds held in the RRSP. This might occur for example if your RRSP held a term deposit that was to be cancelled prior to its maturity. However, this would not be the case where the fee is related to the administration of the RRSP itself. These fees may be paid out of the RRSP or by the annuitant without tax ramification.

For your information, your financial institution’s reluctance to allow you to pay the fees directly may be related to concerns on this matter that have only recently been resolved. Following the March 16, 1996 Budget proposal (which is now law) to disallow the deduction for RRSP/RRIF administration fees where they were paid by the annuitant, this Department was asked to review its position concerning the situation where fees for services were paid out of RRSP or RRIF funds. Our final conclusion was that such fees could be paid by the trust or the annuitant without any tax ramifications.

This review led to several enquiries in regards to other types of fees paid by the annuitant or out of the RRSP or RRIF funds, such as management fees and investment counsel fees for advice that relate specifically to the property of the RRSP or RRIF trust. We then expressed several opinions in this regard based on our understanding of the contractual agreements.

Various providers of these services then advised us that while they did not disagree with our interpretations, there were significant practical difficulties in trying to comply. The reasons for this are the myriad of different types of documentation and contractual agreements, the different types of services provided, the allocation of fees for such services, and the different types of service providers. Also, in some cases, the income tax consequences of the manner in which the parties chose to pay the fees could be very severe. As a result we revisited the issue, and asked for input from the Departments of Finance and Justice and as a consequence, recently revised our position to accept that the payment of management fees related to an RRSP or RRIF trust by the annuitant will not constitute a contribution to the RRSP or RRIF, and to accept that the payment of investment counsel fees by an RRSP or RRIF trust will not result in the receipt of a benefit by the annuitant from the RRSP or RRIF trust, as the case may be. Consequently, these fees will be treated the same as administration fees, in that such fees can be paid by the trust without any income inclusion or paid by the annuitant with no deduction.

Since this is a revision of opinions we previously expressed, and is intended to make it easier for RRSP and RRIF trust administrators, annuitants, and service providers to carry out their business affairs, it is retroactive and thus supersedes our previous positions. As well, these views as they relate to the conferral of benefits by one party on another are confined to the RRSP/RRIF situation.

We trust this provides you with the information you require.

Yours truly,

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

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