Income Tax Act (R.S.C., 1985, c. 1 (5th Supp.))

Marginal note:Creation of trust

• 207.6 (1) In respect of the subject property of a retirement compensation arrangement, other than subject property of the arrangement held by a trust governed by a retirement compensation arrangement, for the purposes of this Part and Part I, the following rules apply:

  • (a) a trust is deemed to be created on the day that the arrangement is established;

  • (b) the subject property of the arrangement is deemed to be property of the trust and not to be property of any other person; and

  • (c) the custodian of the arrangement is deemed to be the trustee having ownership or control of the trust property.

• Marginal note:Life insurance policies

  (2) For the purposes of this Part and Part I, where by virtue of a plan or arrangement an employer is obliged to provide benefits that are to be received or enjoyed by any person on, after or in contemplation of any substantial change in the services rendered by a taxpayer, the retirement of a taxpayer or the loss of an office or employment of a taxpayer, and where the employer, former employer or a person or partnership with whom or which the employer or former employer does not deal at arm’s length acquires an interest in a life insurance policy that may reasonably be considered to be acquired to fund, in whole or in part, those benefits, the following rules apply in respect of the plan or arrangement if it is not otherwise a retirement compensation arrangement and is not excluded from the definition retirement compensation arrangement, in subsection 248(1), by any of paragraphs (a) to (l) and (n) thereof:

  • (a) the person or partnership that acquired the interest is deemed to be the custodian of a retirement compensation arrangement;

  • (b) the interest is deemed to be subject property of the retirement compensation arrangement;

  • (c) an amount equal to twice the amount of any premium paid in respect of the interest or any repayment of a policy loan thereunder is deemed to be a contribution under the retirement compensation arrangement; and

  • (d) any payment received in respect of the interest, including a policy loan, and any amount received as a refund of refundable tax is deemed to be an amount received out of or under the retirement compensation arrangement by the recipient and not to be a payment of any other amount.

• Marginal note:Incorporated employee

  (3) For the purpose of the provisions of this Act relating to retirement compensation arrangements, where

  • (a) a corporation that at any time carried on a personal services business, or an employee of the corporation, enters into a plan or arrangement with a person or partnership (referred to in this subsection as the “employer”) to whom or which the corporation renders services, and

  • (b) the plan or arrangement provides for benefits to be received or enjoyed by any person on, after or in contemplation of the cessation of, or any substantial change in, the services rendered by the corporation, or an employee of the corporation, to the employer,

  the following rules apply:

  • (c) the employer and the corporation are deemed to be an employer and employee, respectively, in relation to each other, and

  • (d) any benefits to be received or enjoyed by any person under the plan or arrangement are deemed to be benefits to be received or enjoyed by the person on, after or in contemplation of a substantial change in the services rendered by the corporation.

• Marginal note:Deemed contribution

  (4) Where at any time an employee benefit plan becomes a retirement compensation arrangement as a consequence of a change of the custodian of the plan or as a consequence of the custodian ceasing either to carry on business through a fixed place of business in Canada or to be licensed or otherwise authorized under the laws of Canada or a province to carry on in Canada the business of offering to the public its services as trustee,

  • (a) for the purposes of this Part and Part I, the custodian of the plan is deemed to have made a contribution to the arrangement immediately after that time, in an amount equal to the fair market value at that time of all the properties of the plan; and

  • (b) for the purposes of section 32.1, that amount is deemed to be a payment made at that time out of or under the plan to or for the benefit of employees or former employees of the employers who contributed to the plan.

• Marginal note:Residents’ arrangement

  (5) For the purposes of this Act, where a resident’s contribution has been made under a plan or arrangement (in this subsection referred to as the “plan”),

  • (a) the plan is deemed, in respect of its application to all resident’s contributions made under the plan and all property that can reasonably be considered to be derived from those contributions, to be a separate arrangement (in this subsection referred to as the “residents’ arrangement”) independent of the plan in respect of its application to all other contributions and property that can reasonably be considered to derive from those other contributions;

  • (b) the residents’ arrangement is deemed to be a retirement compensation arrangement; and

  • (c) each person and partnership to whom a contribution is made under the residents’ arrangement is deemed to be a custodian of the residents’ arrangement.

• Marginal note:Resident’s contribution

  (5.1) For the purpose of subsection 207.6(5), resident’s contribution means such part of a contribution made under a plan or arrangement (in this subsection referred to as the “plan”) at a time when the plan would, but for paragraph (l) of the definition retirement compensation arrangement in subsection 248(1), be a retirement compensation arrangement as

  • (a) is not a prescribed contribution; and

  • (b) can reasonably be considered to have been made in respect of services rendered by an individual to an employer in a period

    • (i) throughout which the individual was resident in Canada and rendered services to the employer that were primarily services rendered in Canada or services rendered in connection with a business carried on by the employer in Canada (or a combination of such services), and

    • (ii) at the beginning of which the individual had been resident in Canada throughout at least 60 of the 72 preceding calendar months, where the individual was non-resident at any time before the period and became a member of the plan before the end of the month after the month in which the individual became resident in Canada,

    and, for the purpose of this paragraph, where benefits provided to an individual under a particular plan or arrangement are replaced by benefits under another plan or arrangement, the other plan or arrangement shall be deemed, in respect of the individual, to be the same plan or arrangement as the particular plan or arrangement.

• Marginal note:Prescribed plan or arrangement

  (6) For the purposes of the provisions of this Act relating to retirement compensation arrangements, the following rules apply in respect of a prescribed plan or arrangement:

  • (a) the plan or arrangement shall be deemed to be a retirement compensation arrangement;

  • (b) an amount credited at any time to the account established in the accounts of Canada or a province in connection with the plan or arrangement shall be, except to the extent that it is in respect of a refund determined under subsection 207.7(2), deemed to be a contribution under the plan or arrangement at that time;

  • (c) the custodian of the plan or arrangement shall be deemed to be

    • (i) where the account is established in the accounts of Canada, Her Majesty in right of Canada, and

    • (ii) where the account is established in the accounts of a province, Her Majesty in right of that province; and

  • (d) the subject property of the plan or arrangement, at any time, shall be deemed to include an amount of cash equal to the balance at that time in the account.

• Marginal note:Transfers

  (7) Where an amount (other than an amount that is part of a series of periodic payments) is transferred directly to a retirement compensation arrangement (other than an arrangement the custodian of which is non-resident or which is deemed by subsection 207.6(5) to be a retirement compensation arrangement) from another retirement compensation arrangement,

  • (a) the amount shall not, solely because of the transfer, be included in computing a taxpayer’s income under Part I;

  • (b) no deduction may be made in respect of the amount in computing a taxpayer’s income under Part I; and

  • (c) the amount is considered, for the purpose of the definition refundable tax in subsection 207.5(1), to be paid as a distribution to one or more persons under the arrangement from which the amount is transferred and to be a contribution made under the arrangement to which the amount is transferred.

Marginal note:Tax payable on prohibited investment

• 207.61 (1) A custodian of a retirement compensation arrangement shall pay a tax under this Part for a calendar year if, at any time in the year,

  • (a) the arrangement acquires property that is a prohibited investment for the arrangement; or

  • (b) subject property of the arrangement becomes a prohibited investment for the arrangement after March 29, 2012.

• Marginal note:Amount of tax payable

  (2) The amount of tax payable in respect of each property described in subsection (1) is 50% of the fair market value of the property at the time referred to in that subsection.

• Marginal note:Refund

  (3) If in a calendar year an RCA trust disposes of a property in respect of which a tax is imposed under subsection (1) on the custodian of the retirement compensation arrangement, the custodian is entitled to a refund for the year of an amount equal to

  • (a) the amount of the tax so imposed, unless paragraph (b) applies; or

  • (b) nil,

    • (i) if it is reasonable to consider that the custodian, or a specified beneficiary of the arrangement, knew, or ought to have known, at the time the property was acquired by the arrangement, that it was, or would become, a property described in subsection (1), or

    • (ii) if the property is not disposed of by the arrangement before the end of the calendar year following the calendar year in which the tax arose, or any later time that the Minister considers reasonable in the circumstances.

• Marginal note:Deemed disposition and reacquisition

  (4) If, at any time, a property held by an RCA trust ceases to be, or becomes, a prohibited investment for the RCA trust, the RCA trust is deemed to have disposed of the property immediately before that time for proceeds of disposition equal to the fair market value of the property at that time and to have reacquired the property at that time at a cost equal to that fair market value.

Marginal note:Tax payable in respect of advantage

• 207.62 (1) A custodian of a retirement compensation arrangement shall pay a tax under this Part for a calendar year if, in the year, an advantage in relation to the arrangement is extended to, or is received or receivable by, an RCA trust under the arrangement, a specified beneficiary of the arrangement or any person who does not deal at arm’s length with the specified beneficiary.

• Marginal note:Amount of tax payable

  (2) The amount of tax payable in respect of an advantage described in subsection (1) is

  • (a) in the case of a benefit, the fair market value of the benefit;

  • (b) in the case of a loan or an indebtedness, the amount of the loan or indebtedness; and

  • (c) in the case of an RCA strip, the amount of the RCA strip.

Marginal note:Joint liability

207.63 If a custodian of a retirement compensation arrangement is liable to pay a tax under section 207.61 or 207.62, a specified beneficiary of the arrangement is jointly and severally, or solidarily, liable for that tax to the extent that the specified beneficiary participated in, assented to or acquiesced in the making of, the transaction or event or series of transactions or events that resulted in the liability.

Marginal note:Waiver of tax payable

207.64 If a person would otherwise be liable to pay a tax under this Part because of any of sections 207.61 to 207.63, the Minister may waive or cancel all or part of the liability if the Minister considers it just and equitable to do so having regard to all the circumstances, including

• (a) whether the tax arose as a consequence of reasonable error; and

• (b) the extent to which the transaction or event or series of transactions or events that gave rise to the tax also gave rise to another tax under this Act.

Marginal note:Deemed distribution

207.65 For the purposes of the definition refundable tax in subsection 207.5(1), tax paid under section 207.61 or 207.62 by a custodian of a retirement compensation arrangement out of property held in connection with the arrangement is deemed to be a distribution under the arrangement for the taxation year in which the tax is paid to the extent that the tax has not been refunded, waived or cancelled.

Marginal note:Tax payable

• 207.7 (1) Every custodian of a retirement compensation arrangement shall pay a tax under this Part for each taxation year of an RCA trust under the arrangement equal to the amount, if any, by which the refundable tax of the arrangement at the end of the year exceeds the refundable tax of the arrangement at the end of the immediately preceding taxation year, if any.

• Marginal note:Refund

  (2) Where the custodian of a retirement compensation arrangement has filed a return under this Part for a taxation year within three years after the end of the year, the Minister

  • (a) may, on sending the notice of assessment for the year or a notification that no tax is payable for the year, refund without application an amount equal to the amount, if any, by which the refundable tax of the arrangement at the end of the immediately preceding year exceeds the refundable tax of the arrangement at the end of the year; and

  • (b) shall, with all due dispatch, make such a refund after sending the notice of assessment if application for it has been made in writing by the custodian within three years after the day of sending of a notice of an original assessment for the year or of a notification that no tax is payable for the year.

• Marginal note:Payment of tax

  (3) Every custodian of a retirement compensation arrangement shall, within 90 days after the end of each taxation year of an RCA trust under the arrangement,

  • (a) file with the Minister a return for the year under this Part in prescribed form and containing prescribed information, without notice or demand therefor;

  • (b) estimate in the return the amount of tax, if any, payable by the custodian under this Part for the year; and

  • (c) pay to the Receiver General the amount of tax, if any, payable by the custodian under this Part for the year.

• Marginal note:Provisions applicable to Part

  (4) Subsections 150(2) and 150(3), sections 152 and 158, subsections 161(1) and 161(11), sections 162 to 167 and Division J of Part I are applicable to this Part with such modifications as the circumstances require.