16 April 2003 External T.I. 2003-0008135 - RRIF TRANSFER-MINIMUM AMOUNT

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 CCRA.

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

Principal Issues:

Why does a RRIF have to withhold the minimum amount on a transfer to another RRIF with the same annuitant?

Position: Required under the Act.

Reasons: Paragraph 146.3(2)(e.1) and (e.2).

XXXXXXXXXX 			2003-000813

April 16, 2003

Dear XXXXXXXXXX:

Re: Requirement to Withhold Minimum Amount on RRIF Transfer

We are writing in reply to your letter of March 10, 2003 wherein you requested an explanation for the requirement that a registered retirement income fund ("RRIF") carrier withhold the minimum amount on the transfer of the RRIF property to another RRIF with the same annuitant.

Comments

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advanced Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant tax services office. The following comments are, therefore, of a general nature only and are not binding on the Canada Customs and Revenue Agency ("CCRA"). All publications referred to herein can be accessed on the CCRA website at the following address: http://www.ccra-adrc.gc.ca/tax/technical/incometax/menu-e.html.

The CCRA's general views regarding the transfer of amounts from a RRIF to another RRIF are contained in paragraphs 8 and 9 of Interpretation Bulletin IT-528 entitled "Transfers of Funds Between Registered Plans".

A "retirement income fund" is defined in subsection 146.3(1) of the Income Tax Act (the "Act") to mean an arrangement under which the carrier undertakes to pay to the annuitant and, where the annuitant elects, to the annuitant's spouse after the annuitant's death, amounts each year which total not less than the lesser of the minimum amount and the fair market value of all the property in the RRIF. The "minimum amount" in respect to a RRIF is defined in subsection 146.3(1) of the Act. Basically, it is an amount equal to the fair market value of the RRIF at the beginning of a year multiplied by a factor determined on the basis of the age of the annuitant at the start of the year or, if the annuitant is deceased, the age the annuitant would have been at the beginning of the year if the annuitant were alive.

Paragraphs 146.3(2)(e.1) and 146.3(2)(e.2) of the Act require that where an annuitant directs the RRIF carrier to transfer all or part of a RRIF's property to another carrier of a RRIF for the annuitant, the transferor carrier must retain property sufficient to pay the minimum amount payable for the year. The reason for such a requirement can be explained as follows. Where RRIF property is transferred from one RRIF carrier to another RRIF carrier during the year, the new RRIF carrier is not required to pay the minimum amount in the year of transfer because it did not hold any property at the beginning of the year. Consequently, without the condition requiring the RRIF carrier to retain the balance of the minimum amount on any transfer of RRIF property to another RRIF carrier, an annuitant would be able to avoid the receipt of the minimum amount each year by transferring the RRIF property to a new RRIF carrier immediately before the old RRIF carrier is required to make the minimum payment under the RRIF arrangement. That is, the original RRIF carrier would not have any property to make the required minimum payment under its RRIF arrangement subsequent to the transfer and the new RRIF carrier is not required to make a minimum payment.

Where an annuitant is not satisfied with the performance of his or her RRIF carrier, there is nothing preventing the annuitant from transferring all of the RRIF property, other than the minimum amount, to another RRIF carrier.

We trust that these comments will be of assistance.

Yours truly,

Mickey Sarazin, C.A.

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