28 September 2012 Internal T.I. 2011-0426861I7 - HBP and LLP repayments by a non-resident

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.

Principal Issues: Whether a non-resident individual can make designated repayments under subsection 146.01(3) or 146.02(3) on his or her HBP balance or LLP balance for taxation years throughout which he or she is non-resident.

Position: No.

Reasons: Pursuant to subsection 146.01(5) or 146.02(5), an individual's entire HBP balance or LLP balance, respectively, is included in computing his or her income on his or her tax return for the taxation year in which he or she ceased to be resident. By virtue of subsection 150(1) and subparagraph 150(1.1)(b)(iv), an individual is required to file a return of income under section 114 for the taxation year in which he or she ceased to be resident if, at the end of that year, his or her HBP balance or LLP balance is a positive amount.

September 28, 2012

Ms. Marlyss Anderson HEADQUARTERS
Senior Program Officer Victor Pietrow
Pension and Partnership Projects 613-948-2227
IRD/HQ
Place Vanier
25 McArthur, Tower C, #380
Ottawa, ON 2011-042686

Home Buyers' Plan and Lifelong Learning Plan Repayments by Non-residents

This is in response to your email of November 4, 2011, in which you consulted us in connection with your office's present practice of not accepting, on returns coded as non-resident, designated repayments under subsections 146.01(3) and 146.02(3) of the Income Tax Act (the Act) in respect of the Home Buyers' Plan (HBP) and the Lifelong Learning Plan (LLP), respectively.

In the situation described by you, an individual

• had an HBP balance and an LLP balance at the time he or she ceased to be resident in Canada,
• did not file a return under section 114 of the Act for the taxation year in which he or she ceased to be resident in Canada, i.e., XXXXXXXXXX (the "emigration year"),
• made registered retirement savings plan (RRSP) contributions in subsequent taxation years, and
• filed returns under sections 115 and 216 of the Act for those subsequent taxation years and designated those RRSP contributions as HBP and LLP designated payments on those returns.

By virtue of subsection 146.01(5), the entire HBP balance is to be included in computing the individual's income for the period in the emigration year during which he or she was resident in Canada, except to the extent of amounts designated by him or her under subsection 146.01(3). For this purpose, by virtue of paragraph 146.01(5)(b), the individual can only designate under subsection 146.01(3) in respect of amounts paid in the RRSP not later than 60 days after the time he or she ceased to be resident in Canada and before he or she files a return of income for the emigration year.

By virtue of subsection 146.01(5) and subparagraph 146.01(3)(b)(iii), designations under subsection 146.01(3) are not possible in respect of amounts paid into the RRSP

• more than 60 days after he or she ceased to be resident in Canada, or
• after he or she files a return of income for the emigration year.

Similarly, by virtue of subsection 146.02(5), the entire LLP balance is to be included in computing the individual's income for the period in the emigration year during which he or she was resident in Canada, except to the extent of amounts designated by him or her under subsection 146.02(3). For this purpose, by virtue of paragraph 146.02(5)(b), the individual can only designate under subsection 146.02(3) in respect of amounts paid not later than 60 days after the time he or she ceased to be resident in Canada and before he or she files a return of income for the emigration year.

By virtue of subsection 146.02(5) and subparagraph 146.02(3)(b)(iii), designations by the individual under subsection 146.02(3) are not possible in respect of amounts paid into the RRSP

• more than 60 days after he or she ceased to be resident in Canada, or
• after the time he or she files a return of income for the emigration year.

It is the cessation of residence in Canada (rather than the filing of a return of income under section 114 of the Act) that creates the income inclusion under subsection 146.01(5) or 146.02(5).

By virtue of subsection 150(1), a taxpayer is obligated to file a return of income for a taxation year. The exception under paragraph 150(1.1)(b) for individuals from subsection 150(1) is not available if subparagraph 150(1.1)(b)(iv) applies, i.e., "at the end of the year the individual's HBP balance or LLP balance (as defined in subsection 146.01(1) or 146.02(1)) is a positive amount", which is the case in your situation.

If your records for the individual show an HBP balance or LLP balance for taxation years throughout which he or she was non-resident, this would indicate that the individual should have filed a return of income under section 114 for the emigration year and reported the income inclusion under subsection 146.01(5) or 146.02(5) in the return.

In our view, your office's present practice of not accepting, on returns coded as non-resident, designated repayments under subsections 146.01(3) and 146.02(3) is correct.

We trust that these comments will be of assistance.

Mary Pat Baldwin, CA
for Director
Financial Industries Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch