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:
Limitation on foreign content held by RRSPs on a trust by trust basis.
Position:
Existing law does not allow the combination of plans to determine foreign content limit.
Reasons:
The law clearly provides that each trust is subject to the foreign content limit.
XXXXXXXXXX 2002-013302
Karen Power, CA
(613) 957-8953
May 14, 2002
Dear XXXXXXXXXX:
Re: Foreign Property held in Registered Retirement Savings Plans ("RRSPs")
We are writing in reply to your letter dated March 15, 2002 requesting our comments on the application of Part XI of the Income Tax Act (the "Act") on the excess foreign property held in one of your RRSP, even though the aggregate foreign content held by all your RRSPs would be within the limit allowed under the Act if they were combined.
Pursuant to paragraph 205(b) of the Act, the Part XI tax on excess foreign property is levied against each trust governed by an RRSP. Subsection 206(2) provides that where at the end of any month after 2000 the total of the cost amount of foreign property exceeds generally 30% of the cost amount of all property held at that time, the RRSP trust is subject to a tax of 1% of the lesser of the excess and the total of the cost amounts of all foreign property. Consequently, it is the property in each individual RRSP trust that is subject to the limits imposed by subsection 206(2) of the Act and not the aggregate property held in all of the RRSP trusts of the one annuitant.
We believe that applying Part XI to each individual trust is only logical. The penalty tax would be impossible for the trustees or the Canada Customs and Revenue Agency ("CCRA") to administer where an annuitant has several RRSPs with different trustees. The most obvious problems that we could identify are as follows:
? How would one RRSP trust know that the annuitant also has other RRSP trusts?
? Where there are several RRSP trusts, how would each RRSP trust know the cost amount of the property held by the other RRSP trusts?
? Which particular RRSP trust would be subjected to the Part XI taxes should the aggregate foreign property held by all of the RRSP trusts exceed the limits allowed under the Act?
? Where the Part XI taxes are not paid, which RRSP trust would be subjected to the applicable penalty taxes?
The current provisions of Part XI of the Act can be easily administered by the CCRA and the trustees of each particular RRSP trust. In addition, each RRSP trust is only responsible for the property it holds. For these reasons, the Part XI provisions have to be applied to the individual RRSP trusts.
We trust our comments will be of assistance to you. These comments are provided in accordance with the practice outlined in paragraph 22 of Information Circular 70-6R4.
Yours truly,
Mickey Sarazin, CA
for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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