Section 207.7

Subsection 207.7(1) - Tax payable

Administrative Policy

19 May 1995 External T.I. 9505285 - ANNUITY AS RCA

Where an annuity contract purchased by an employer to provide retirement benefits for an employee is not a prescribed annuity, the payment by the employer of the tax on the deemed interest on the accumulating fund will be considered to be an additional contribution to the RCA which, in turn, would be subject to the refundable tax. The Department agrees to stop the resulting pyramiding of refundable tax after the third calculation.

92 C.R. - Q.48

Where an employer establishes a trust and contributes cash to the trustee in an amount that, after giving affect to the 50% refundable tax, is equal to the fee charged by a bank for issuing a letter of credit to the trust, such amount will be the amount of the contribution, rather than the face amount of the letter of credit.

The provision by the employer of security to the bank would constitute a separate contribution to the retirement compensation arrangement.


O'Connor, "Funding Supplemental Retirement Plans", 1991 Canadian Tax Journal, p. 149.