10 January 2000 External T.I. 9927335 - RRIF LUMP-SUM PAYMENTS WITHHOLDINGS

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 a taxpayer requests more than one lump sum payment in a year, are the withholdings required under subsection 103(4) of the Regulations based on the individual amounts paid or on the aggregate amounts paid?

Position: Withholdings based upon the request submitted by the taxpayer.

Reasons: The position has been taken by the Trust Accounts Division.

XXXXXXXXXX 					992733
M. P. Sarazin
Attention: XXXXXXXXXX 

January 10, 2000

Dear Sir\Madam:

Re: Withholding Taxes and Lump Sum Payments

This is in response to your letter dated October 8, 1999, wherein you requested our comments regarding the application of subsection 103(4) of the Income Tax Regulations (the "Regulations") to multiple lump sum payments, within the meaning assigned by subsection 103(6) of the Regulations, made in a calendar year. Please note that enquiries related to withholding requirements in specific situations should be directed to the Trust Accounts Division of your local tax services office.

Comments

As you may be aware, on November 1, 1999, Revenue Canada became the Canada Customs and Revenue Agency (the "CCRA").

Paragraph 153(1)(l) of the Income Tax Act (the "Act") requires a person paying an amount from a RRIF to withhold a prescribed amount of Part I tax. Section 101 of the Income Tax Regulations (the "Regulations") requires that every person making a payment described in subsection 153(1) of the Act shall deduct or withhold such amount, if any, as is determined by the Regulations.

Subsection 103(4) of the Regulations contains the provisions for withholding on "lump sum payments". Under paragraph 103(6)(d.1) of the Regulations, a lump sum payment includes a payment made during the lifetime of an annuitant under a RRIF of that annuitant, other than a payment to the extent that it is in respect of the minimum amount (within the meaning assigned by subsection 146.3(1) of the Act). The withholding amount under subsection 103(4) of the Regulations is computed on each individual lump sum payment. We have confirmed with the Trust Accounts Division, Headquarters, that the CCRA has taken the position that, if each withdrawal is the result of a separate request by the annuitant, the applicable rate of withholding is based on the individual payment requests. However, if the withdrawals are in the nature of installments made in fulfillment of a single request by the annuitant, it is the CCRA's position that the rate of withholding will be based on the total sum requested and not on each individual installment.

Subsection 153(1.2) of the Act allows the taxpayer to elect to increase the withholdings that are required under subsection 153(1) of the Act. Taxpayers may want to consider this option where it is evident that the withholdings are insufficient to cover the income taxes that will have to be paid on the lump sum payments when the taxpayer files his or her return.

We trust the above comments will be of assistance to you.

Yours truly,

Patricia Spice
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate