Section 207.6

Subsection 207.6(2) - Life insurance policies

Administrative Policy

1 May 1991 T.I. (Tax Window, No. 3, p. 11, ¶1227)

Part XI.3 applies where a corporation purchases a life annuity in order to provide additional retirement income to an employee. The corporation would be deemed to be the custodian and the annuity (which would be deemed under s. 138(12)(f) to be a "life insurance policy") would constitute the subject property.

17 April 1991 T.I. (Tax Window, No. 2, p. 20, ¶1205)

Where the employer wishes to withdraw funds from insurance policies which have been acquired by the custodian of an employee benefit plan where the amounts withdrawn will be used to purchase an annuity to provide an employee with retirement income, then pursuant to s. 207.6(2) the employer will be deemed to be the custodian of an RCA, the annuity will be the property of the RCA, and an amount equal to twice the cost of the annuity will be deemed to be a contribution to the RCA.

8 September 89 T.I. (February 1990 Access Letter, ¶1125)

An employer purchased an exempt life insurance policy on the lives of the employees, one of the employees died and the benefit under the policy was paid to the employer corporation, which was obligated to use a portion of the proceeds to pay a death benefit to the estate of the deceased, and the remainder of the death benefit to pay the future premiums on the remaining life insurance policies. The full amount of the death benefit was taxable to the employer by virtue of ss.207.6(2)(d) and 12(1)(m.3). An amount equal to twice the premiums paid on the remaining life insurance plans would be treated as a contribution to the plan pursuant to s. 207.6(2)(c). The receipt of the death benefit from the policy by the employer would be taken into account in determining the "refundable tax" as defined under s. 207.5(1), and any tax refunded to the employer would also be taxable to it. The benefits paid by the employer to the estate in excess of $10,000 would be taxed as a death benefit.

Significantly different results obtained where a trusteed RCA was established.

88 C.R. - Q.30

S.207.6(2) extends to the purchase of an insurance policy to fund an obligation to pay retiring allowances where the employer is the owner of the policy and the sole beneficiary.


Holmes, "Life Insurance Proceeds May Be Taxable Where a Policy is Used to Fund Supplemental Retirement Plan", Taxation of Executive Compensation and Retirement, May 1990, p. 275.

Subsection 207.6(4) - Deemed contribution

Administrative Policy

14 November 89 T.I. (April 90 Access Letter, ¶1185)

Where there is a provision in an employee benefit plan for a change of trustee and the new trustee is resident in Canada, this change in trustee would not by itself result in the application of s. 207.6(4).

Subsection 207.6(5) - Residents’ arrangement

Administrative Policy

3 December 1997 External T.I. 9715195 - FOREIGN PENSION PLAN

General discussion of contributions to a foreign pension plan.


Jim Kahane, Uros Karadzic, Simon Létourneau-Laroche, "A Fresh Look at Retirement Compensation Arrangement: A Flexible Vehicle for Retirement Planning", Canadian Tax Journal (2013) 61:2, 479 – 502.

Resident contribution rule (p. 491)

Under these rules, if a newcomer to Canada remains a member of his or her home-country pension plan for more than five years, the foreign pension plan may still be considered an RCA for Canadian tax purposes. The RCA rules, including the requirement to pay tax into an RTA, will apply with respect to the resident's contributions, unless the employer makes an election with respect to the foreign arrangement such that the contributions are considered "prescribed contributions". [fn 58: Regulation 6804(2).]

Implications of prescribed contributions (p. 492)

If the contributions to the foreign retirement arrangement are prescribed contributions, the RCA rules will not apply, even if the employee is present in Canada beyond the five-year period. In this case, the characterization of the retirement arrangement and tax treatment will depend on the specific facts. For example, foreign pension plans are likely to be considered EBPs for Canadian tax purposes, since a custodian is involved in delivering retirement benefits. Consequently, the employer's deduction will be deferred to the year in which the employee is subject to tax on a distributions by the EBP. [fn 63: Subsection 32.1(1)] …

Subsection 207.6(7)

Administrative Policy

2019 Ruling 2019-0803761R3 - New RCA to replace benefits under existing RCA

transfer of property from old to new RCA trust with more liberal terms

CRA ruled that a new supplemental pension plan would qualify as a retirement compensation arrangement and that s. 207.6(7) would apply to the transfer from the old RCA trust to the new one (which would also entail CRA being asked to now hold the existing 50% refundable tax for the account of the new trust). The new trust had similar terms to, but with more flexible payout terms than, the old trust.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Retirement Compensation Arrangement new RCA trust permits the retired employee to request an immediate payout on “a material deterioration in the Canadian economy” 451