Finance provides comfort letter re no advantage tax applying where RRSP or TFSA fees (described in s. 20(1)(bb)) are paid by the annuitant or holder

In 29 November 2016 CTF Roundtable Q. 5, 2016-0670801C6, CRA indicated that the payment of fees for investment management of an RRSP, RRIF or TFSA by the plan “controlling individual” (i.e., annuitant or holder) typically would now be considered as an “advantage” giving rise to tax under s. 207.05(1) equal to 100% of the fee amount (noting inter alia under the hypothetical arm’s length test in s. 207.01(1) – advantage - (b)(i) that it would not be “commercially reasonable for an arm’s length party to gratuitously pay the expenses of another party”) - but that it would defer applying this new position until January 1, 2018 (subsequently extended by 2017-0722391E5 to January 1, 2019).

Shortly after releasing its new Folio on Advantages, CRA then stated (in 2018-0779261E5) that it was “deferring implementation of the position pending completion of a review of the issue by the Department of Finance.”

Finance has now issued a comfort letter stating:

[W]e have no tax policy concerns with respect to the payment of investment management fees directly by the annuitant/holder of the registered plan. … Generally, the direct payment of fees results in either a net loss, or negligible gain, for the plan holder. We are therefore prepared to recommend … that paragraph (b) of the definition "advantage" … be amended [respecting 2018 and subsequent taxation years] such that it does not apply to payments by a controlling individual of a registered plan, not exceeding a reasonable amount, of fees described in paragraph 20(l)(bb) … .

Neal Armstrong. Summary of 26 August 2019 Comfort Letter - “Advantage”: Exclusion for Investment Management Fees under s. 207.01(1) – advantage – (b)(i).