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

Act current to 2014-06-12 and last amended on 2014-01-01. Previous Versions

PART XI.3TAX IN RESPECT OF RETIREMENT COMPENSATION ARRANGEMENTS

Marginal note:Definitions
  •  (1) In this Part,

    “advantage”

    « avantage »

    “advantage”, in relation to a retirement compensation arrangement, means

    • (a) any benefit, loan or indebtedness that is conditional in any way on the existence of the arrangement, other than

      • (i) a benefit derived from the provision of administrative or investment services in respect of the arrangement,

      • (ii) a loan or an indebtedness the terms and conditions of which are terms and conditions that persons dealing at arm’s length with each other would have entered into, and

      • (iii) a payment out of or under the arrangement that is included in computing a taxpayer’s income under Part I, and

    • (b) a benefit that is an increase in the total fair market value of the subject property of the arrangement if it is reasonable to consider, having regard to all the circumstances, that the increase is attributable, directly or indirectly, to a transaction or event or a series of transactions or events one of the main purposes of which was to enable a person or a partnership to benefit from a provision of this Part, or from the exemption from tax under paragraph 149(1)(q.1), if the transaction, event or series

      • (i) would not have occurred in a normal commercial or investment context in which parties deal with each other at arm’s length and act prudently, knowledgeably and willingly, or

      • (ii) included a payment received as, on account or in lieu of, or in satisfaction of, a payment

        • (A) for services provided by a person who is, or does not deal at arm’s length with, a specified beneficiary of the arrangement, or

        • (B) of interest, of a dividend, of rent, of a royalty or of any other return on investment, or of proceeds of disposition, in respect of property (other than subject property of the arrangement) held by a person who is, or does not deal at arm’s length with, a specified beneficiary of the arrangement,

    • (c) a benefit that is income or a capital gain that is reasonably attributable, directly or indirectly, to

      • (i) a prohibited investment in respect of the arrangement,

      • (ii) an amount received by a specified beneficiary of the arrangement, or by a person who does not deal at arm’s length with the specified beneficiary, if it is reasonable to consider, having regard to all the circumstances, that the amount was paid in relation to, or would not have been paid but for, subject property of the arrangement and the amount was paid as, on account or in lieu of, or in satisfaction of, a payment

        • (A) for services provided by a person who is, or who does not deal at arm’s length with, the specified beneficiary, or

        • (B) of interest, of a dividend, of rent, of a royalty or of any other return on investment, or of proceeds of disposition,

    • (d) an RCA strip in respect of the arrangement, and

    • (e) a prescribed benefit;

    “prohibited investment”

    « placement interdit »

    “prohibited investment”, for a retirement compensation arrangement at any time, means property (other than prescribed excluded property) that is at that time

    • (a) a debt of a specified beneficiary of the arrangement,

    • (b) a share of the capital stock of, an interest in, or a debt of

      • (i) a corporation, partnership or trust in which the specified beneficiary has a significant interest, or

      • (ii) a person or partnership that does not deal at arm’s length with, or is affiliated with, the specified beneficiary,

    • (c) an interest (or, for civil law, a right) in, or a right to acquire, a share, interest or debt described in paragraph (a) or (b), or

    • (d) prescribed property;

    “RCA strip”

    « somme découlant d’un dépouillement de CR »

    “RCA strip”, in respect of a retirement compensation arrangement, means the amount of a reduction in the fair market value of subject property of the arrangement, if the value is reduced as part of a transaction or event or a series of transactions or events one of the main purposes of which is to enable a specified beneficiary of the arrangement, or a person or a partnership who does not deal at arm’s length with the specified beneficiary, to benefit from a provision of this Part or to obtain a benefit in respect of subject property of the arrangement or as a result of the reduction, but does not include an amount that is included in computing the income of the specified beneficiary or of an employer or former employer of the specified beneficiary;

    “RCA trust”

    « fiducie de convention de retraite »

    “RCA trust” under a retirement compensation arrangement means

    • (a) any trust deemed by subsection 207.6(1) to be created in respect of subject property of the arrangement, and

    • (b) any trust governed by the arrangement;

    “refundable tax”

    « impôt remboursable »

    “refundable tax” of a retirement compensation arrangement at the end of a taxation year of an RCA trust under the arrangement means the amount, if any, by which the total of

    • (a) 50% of all contributions made under the arrangement while it was a retirement compensation arrangement and before the end of the year, and

    • (b) 50% of the amount, if any, by which

      • (i) the total of all amounts each of which is the income (determined as if this Act were read without reference to paragraph 82(1)(b)) of an RCA trust under the arrangement from a business or property for the year or a preceding taxation year or a capital gain of the trust for the year or a preceding taxation year,

      exceeds

      • (ii) the total of all amounts each of which is a loss of an RCA trust under the arrangement from a business or property for the year or a preceding taxation year or a capital loss of the trust for the year or a preceding taxation year,

    exceeds

    • (c) 50% of all amounts paid as distributions to one or more persons (including amounts that are required by paragraph 12(1)(n.3) to be included in computing the recipient’s income) under the arrangement while it was a retirement compensation arrangement and before the end of the year, other than a distribution paid where it is established, by subsequent events or otherwise, that the distribution was paid as part of a series of payments and refunds of contributions under the arrangement;

    “significant interest”

    « participation notable »

    “significant interest” has the same meaning as in subsection 207.01(4);

    “specified beneficiary”

    « bénéficiaire déterminé »

    “specified beneficiary”, of a retirement compensation arrangement, means an individual who has an interest or a right in respect of the arrangement and who has or had a significant interest in an employer or former employer in respect of the arrangement;

    “subject property of a retirement compensation arrangement”

    « bien déterminé d’une convention de retraite »

    “subject property of a retirement compensation arrangement” means property that is held in connection with the arrangement.

  • Marginal note:Election

    (2) Notwithstanding the definition “refundable tax” in subsection 207.5(1), where the custodian of a retirement compensation arrangement so elects in the return under this Part for a taxation year of an RCA trust under the arrangement and all the subject property, if any, of the arrangement (other than a right to claim a refund under subsection 164(1) or 207.7(2)) at the end of the year consists only of cash, debt obligations, shares listed on a designated stock exchange, or any combination thereof, an amount equal to the total of

    • (a) the amount of that cash at the end of the year,

    • (b) the total of all amounts each of which is the greater of the principal amount of such a debt obligation outstanding at the end of the year and the fair market value of the obligation at the end of the year, and

    • (c) the fair market value of those shares at the end of the year

    shall be deemed for the purposes of this Part to be the refundable tax of the arrangement at the end of the year.

  • Marginal note:Limitation on election

    (3) Subsection (2) does not apply in respect of an RCA trust if any part of a decline in the fair market value of subject property of the retirement compensation arrangement is reasonably attributable to a prohibited investment for, or an advantage in relation to, the RCA trust unless the Minister is satisfied that it is just and equitable to allow the election to be made, having regard to all the circumstances, in which case, the Minister may adjust the amount deemed by subsection (2) to be the refundable tax of the arrangement to take into account all or part of the decline in the fair market value of the subject property.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. 1987, c. 46, s. 62;
  • 2007, c. 35, s. 68;
  • 2012, c. 31, s. 44.