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:
Is there an advantage under subsection 146(13.1) when the RRSP is included in the value of an individual's holdings to determine if the individual gets preferential pricing on financial products.
Position: Yes
Reasons:
If such preferential pricing is linked to the issue or existence of an RRSP, it is prohibited even if it available to other customers.
XXXXXXXXXX 2001-010007
M. P. Baldwin, CA
February 21, 2002
Dear XXXXXXXXXX:
This is in reply to your letter of August 8, 2001, which was received in this office on September 5, 2001, requesting our views on whether a particular program is an advantage pursuant to subsection 146(13.1) of the Income Tax Act (the "Act").
The particular situation outlined in your letter appears to relate to a factual one, involving a specific taxpayer. As explained in Information Circular 70-6R4, it is not this Directorate's practice to comment on proposed transactions involving specific taxpayers other than in the form of an advance income tax ruling. Should your situation involve a specific taxpayer and a completed transaction, you should submit all relevant facts and documentation to the appropriate Tax Services Office for their views. However, we are prepared to offer the following general comments, which may be of assistance.
In your letter, you describe a situation where a program offers preferential pricing on financial services to individuals who meet certain threshold levels of business with the financial institution. In order to qualify for these lower prices on financial services, the individual must have any combination of deposits, loans and mortgages totaling $75,000. The deposits that are included in the qualifying mix of deposits include both registered and non-registered deposits.
In your view, the extension of the preferential pricing to individuals who happen to have registered deposits with the institution does not constitute a "prohibited advantage" under subsection 146(13.1) of the Act.
The longstanding position of the Canada Customs and Revenue Agency is that offers from RRSP issuers of such things as chances to win trips, free appliances, interest-free loans, etc., to purchasers of their RRSPs are advantages that are prohibited by paragraph 146(2)(c.4) of the Act, notwithstanding that the customer could obtain the advantage by some other means such as purchasing a GIC, opening a non-RRSP account, etc. On the other hand, where an institution offers a chance to win a prize to anyone whether or not that person deals with the institution, it is our view that the institution is not extending any advantage that is conditional on the existence of an RRSP.
In our view, an offer would contravene the provisions of paragraph 146(2)(c.4) of the Act if it is linked in any manner to the issue or the existence of an RRSP. Under the program noted in your letter, the preferential pricing of financial products for some individuals was made conditional on the existence of an RRSP and, therefore, is a contravention of paragraph 146(2)(c.4) of the Act. Consequently, the provisions of subsection 146(13.1) of the Act should apply with respect to the preferential pricing on financial products received by an individual who uses their RRSP to meet the threshold level. It does not matter that some other individuals obtained preferential pricing of financial products based on deposits unassociated with an RRSP.
We trust the above comments will be of assistance to you.
Yours truly,
Roberta Albert, CA
for Director
Financial Industries Division
Income Tax Rulings Directorate
c.c..: John O'Meara
Registered Plans Directorate
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