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Income Tax Regulations (C.R.C., c. 945)

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Regulations are current to 2022-06-20 and last amended on 2022-06-09. Previous Versions

PART LXVIIIPrescribed Plans, Arrangements and Contributions (continued)

[
  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/96-311, s. 1
]

COVID-19 — Deferred salary leave plan (continued)

 For the purposes of the definition foreign retirement arrangement in subsection 248(1) of the Act, a prescribed plan or arrangement is a plan or arrangement to which subsection 408(a), (b) or (h) of the United States’ Internal Revenue Code of 1986, as amended from time to time, applies.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/92-692, s. 1
  • SOR/2007-116, s. 10

Contributions to Foreign Plans

Definitions

  •  (1) The definitions in this subsection apply in this section.

    foreign non-profit organization

    foreign non-profit organization means,

    • (a) at any time before 1995, an organization

      • (i) that at that time meets the conditions in subparagraphs (b)(i) to (iii), or

      • (ii) that at that time is not operated for the purpose of profit, and whose assets are situated primarily outside Canada throughout the calendar year that includes that time, and

    • (b) at any time after 1994, an organization that at that time

      • (i) is not operated for the purpose of profit,

      • (ii) has its main place of management outside Canada, and

      • (iii) carries on its activities primarily outside Canada. (organisme étranger à but non lucratif)

    foreign plan

    foreign plan means a plan or arrangement (determined without regard to subsection 207.6(5) of the Act) that would, but for paragraph (l) of the definition retirement compensation arrangement in subsection 248(1) of the Act, be a retirement compensation arrangement. (régime étranger)

    qualifying entity

    qualifying entity means a non-resident entity that holds all or part of the assets of a foreign plan where the following conditions are satisfied:

    • (a) the entity is resident in a country under the laws of which an income tax is imposed, and

    • (b) where those laws provide an exemption from tax, a reduced rate of tax or other favourable tax treatment for entities that hold assets of pension or other retirement plans, the entity qualifies for the favourable treatment. (entité admissible)

Electing Employer
  • (2) For the purposes of this section, an employer is an electing employer for a calendar year with respect to a foreign plan where

    • (a) the employer has sent or delivered to the Minister a letter stating that the employer elects to have this section apply with respect to contributions to the foreign plan, and

    • (b) the letter was sent or delivered on or before

      • (i) the last day of February in the year following the first calendar year after 1991 in which a contribution that is, or would be if subsection 207.6(5.1) of the Act were read without reference to paragraph (a) of that subsection, a resident’s contribution (as defined in that subsection) was made under the foreign plan in respect of services rendered by an individual to the employer, or

      • (ii) any later date that is acceptable to the Minister,

    except that an employer is not an electing employer for a year with respect to a foreign plan if the Minister has granted written permission for the employer to revoke, for the year or a preceding calendar year, the election made under paragraph (a) in respect of the foreign plan.

Election by Union
  • (3) Except as otherwise permitted in writing by the Minister, an election made by a trade union for the purpose of subsection (2) is valid only if it is made by the highest-level structural unit of the union.

Contributions Made before 1992
  • (4) For the purpose of paragraph 207.6(5.1)(a) of the Act, a contribution made under a foreign plan by a person or body of persons in a calendar year before 1992 is a prescribed contribution where

    • (a) the contribution is paid to a qualifying entity;

    • (b) each employer (in this subsection referred to as a “contributor”) that makes a contribution under the foreign plan in the year is

      • (i) a non-resident corporation throughout the year,

      • (ii) a partnership that makes contributions under the foreign plan primarily in respect of services rendered outside Canada to the partnership by non-resident employees, or

      • (iii) a foreign non-profit organization throughout the year;

    • (c) if a corporation or partnership (other than a corporation or partnership that is a foreign non-profit organization throughout the year) is a contributor, no individual who is entitled (either absolutely or contingently) to benefits under the foreign plan is a member of a registered pension plan, or a beneficiary under a deferred profit sharing plan, to which a contributor, or a person or body of persons not dealing at arm’s length with a contributor, makes, or is required to make, contributions in relation to the year;

    • (d) contributions made in the year under the foreign plan for the benefit of individuals resident in Canada are reasonable in relation to contributions made under the plan for the benefit of non-resident individuals; and

    • (e) the foreign plan is not a pension plan the registration of which under the Act has been revoked.

Contributions Made in 1992, 1993 or 1994
  • (5) For the purpose of paragraph 207.6(5.1)(a) of the Act, a contribution made under a foreign plan by a person or body of persons at any time in 1992, 1993 or 1994 in respect of services rendered by an individual to an employer is a prescribed contribution where

    • (a) the contribution is paid to a qualifying entity;

    • (b) the employer is an electing employer for the year with respect to the foreign plan;

    • (c) if the employer is not at that time a foreign non-profit organization, the individual is not a member of a registered pension plan (other than a specified multi-employer plan, as defined in subsection 147.1(1) of the Act), or a deferred profit sharing plan, in which the employer, or a person or body of persons that does not deal at arm’s length with the employer, participates; and

    • (d) either

      • (i) the employer is

        • (A) a corporation that is not resident in Canada at that time,

        • (B) a partnership that makes contributions under the foreign plan primarily in respect of services rendered outside Canada to the partnership by non-resident employees, or

        • (C) a foreign non-profit organization at that time, or

      • (ii) the individual was non-resident at any time before the contribution is made and became a member of the foreign plan before the end of the month after the month in which the individual became resident in Canada.

Contributions Made after 1994
  • (6) For the purposes of paragraph 207.6(5.1)(a) of the Act, a contribution made under a foreign plan by a person or body of persons at any time in a calendar year after 1994 in respect of services rendered by an individual to an employer is a prescribed contribution where

    • (a) the contribution is paid to a qualifying entity;

    • (b) the employer is an electing employer for the year with respect to the foreign plan;

    • (c) if the employer is at that time a foreign non-profit organization,

      • (i) the amount that, if subsection 8301(1) were read without reference to paragraph (b) of that subsection, would be the individual’s pension adjustment for the year in respect of the employer is nil, or

      • (ii) the amount that would be the individual’s pension adjustment for the year in respect of the employer if

        • (A) all contributions made under the foreign plan in the year in respect of the individual were prescribed by this subsection,

        • (B) where the year is 1996, section 8308.1 were read without reference to subsection (4.1), and

        • (C) where the year is 1997, subparagraph 8308.1(2)(b)(v) were read as

          • “(v) the amount, if any, by which 18% of the individual’s resident compensation from the employer for the year exceeds $1,000, and”

        does not exceed the lesser of

        • (D) the money purchase limit for the year, and

        • (E) 18% of the individual’s compensation (as defined in subsection 147.1(1) of the Act) for the year from the employer;

    • (d) if

      • (i) the employer is at that time a foreign non-profit organization, and

      • (ii) a period in the year throughout which the individual rendered services to the employer would be, under paragraph 8507(3)(a), a qualifying period of the individual with respect to another employer if that paragraph were read without reference to subparagraph (iv) of that paragraph,

      subsection 8308(7) applies with respect to the determination of the individual’s pension adjustment for the year with respect to each employer; and

    • (e) if the employer is not at that time a foreign non-profit organization,

      • (i) the individual was non-resident at any time before the contribution is made,

      • (ii) the individual became a member of the foreign plan before the end of the month after the month in which the individual became resident in Canada, and

      • (iii) the individual is not a member of a registered pension plan, or a deferred profit sharing plan, in which the employer, or a person or body of persons that does not deal at arm’s length with the employer, participates.

Replacement Plan
  • (7) For the purposes of subparagraphs (5)(d)(ii) and (6)(e)(ii), 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 is deemed, in respect of the individual, to be the same plan or arrangement as the particular plan or arrangement.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/96-311, s. 4
  • SOR/99-9, s. 2

PART LXIXPrescribed Offshore Investment Fund Properties

 For the purpose of paragraph 94.1(2)(a) of the Act, an offshore investment fund property (within the meaning assigned by subsection 94.1(1) of the Act) of a taxpayer that

  • (a) was acquired by him by way of bequest or inheritance from a deceased person who, throughout the five years immediately preceding his death, was not resident in Canada,

  • (b) had not been acquired by the deceased from a person resident in Canada, and

  • (c) is not property substituted for property acquired by the deceased from a person resident in Canada

is a prescribed offshore investment fund property of the taxpayer.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/86-488, s. 10

 [Repealed, SOR/85-696, s. 18]

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/85-696, s. 18

PART LXXAccrued Interest on Debt Obligations

  •  (1) For the purpose of subsection 12(9) of the Act, each of the following debt obligations (other than a debt obligation that is an indexed debt obligation) in respect of which a taxpayer has at any time acquired an interest is a prescribed debt obligation:

    • (a) a particular debt obligation in respect of which no interest is stipulated to be payable in respect of its principal amount,

    • (b) a particular debt obligation in respect of which the proportion of the payments of principal to which the taxpayer is entitled is not equal to the proportion of the payments of interest to which he is entitled,

    • (c) a particular debt obligation, other than one described in paragraph (a) or (b), in respect of which it can be determined, at the time the taxpayer acquired the interest therein, that the maximum amount of interest payable thereon in a year ending after that time is less than the maximum amount of interest payable thereon in a subsequent year, and

    • (d) a particular debt obligation, other than one described in paragraph (a), (b) or (c), in respect of which the amount of interest to be paid in respect of any taxation year is, under the terms and conditions of the obligation, dependent on a contingency existing after the year,

    and, for the purposes of this subsection, a debt obligation includes, for greater certainty, all of the issuer’s obligations to pay principal and interest under that obligation.

  • (2) For the purposes of subsection 12(9) of the Act, the amount determined in prescribed manner that is deemed to accrue to a taxpayer as interest on a prescribed debt obligation in each taxation year during which he holds an interest in the obligation is,

    • (a) in the case of a prescribed debt obligation described in paragraph (1)(a), the amount of interest that would be determined in respect thereof if interest thereon for that year were computed on a compound interest basis using the maximum of all rates each of which is a rate computed

      • (i) in respect of each possible circumstance under which an interest of the taxpayer in the obligation could mature or be surrendered or retracted, and

      • (ii) using assumptions concerning the interest rate and compounding period that will result in a present value, at the date of purchase of the interest, of all the maximum payments thereunder, equal to the cost thereof to the taxpayer;

    • (b) in the case of a prescribed debt obligation described in paragraph (1)(b), the aggregate of all amounts each of which is the amount of interest that would be determined in respect of his interest in a payment under the obligation if interest thereon for that year were computed on a compound interest basis using the specified cost of his interest therein and the specified interest rate in respect of his total interest in the obligation, and for the purposes of this paragraph,

      • (i) the specified cost of his interest in a payment under the obligation is its present value at the date of purchase computed using the specified interest rate, and

      • (ii) the specified interest rate is the maximum of all rates each of which is a rate computed

        • (A) in respect of each possible circumstance under which an interest of the taxpayer in the obligation could mature or be surrendered or retracted, and

        • (B) using assumptions concerning the interest rate and compounding period that will result in a present value, at the date of purchase of the interest, of all the maximum payments to the taxpayer in respect of his total interest in the obligation, equal to the cost of that interest to the taxpayer;

    • (c) in the case of a prescribed debt obligation described in paragraph (1)(c), other than an obligation in respect of which paragraph (c.1) applies, the greater of

      • (i) the maximum amount of interest thereon in respect of the year, and

      • (ii) the maximum amount of interest that would be determined in respect thereof if interest thereon for that year were computed on a compound interest basis using the maximum of all rates each of which is a rate computed

        • (A) in respect of each possible circumstance under which an interest of the taxpayer in the obligation could mature or be surrendered or retracted, and

        • (B) using assumptions concerning the interest rate and compounding period that will result in a present value, at the date of issue of the obligation, of all the maximum payments thereunder, equal to its principal amount;

    • (c.1) in the case of a prescribed debt obligation described in paragraph (1)(c) for which

      • (i) the rate of interest stipulated to be payable in respect of each period throughout which the obligation is outstanding is fixed at the date of issue of the obligation, and

      • (ii) the stipulated rate of interest applicable at each time is not less than each stipulated rate of interest applicable before that time,

      the amount of interest that would be determined in respect of the year if interest on the obligation for that year were computed on a compound interest basis using the maximum of all rates each of which is the compound interest rate that, for a particular assumption with respect to when the taxpayer’s interest in the obligation will mature or be surrendered or retracted, results in a present value (at the date the taxpayer acquires the interest in the obligation) of all payments under the obligation after the acquisition by the taxpayer of the taxpayer’s interest in the obligation equal to the principal amount of the obligation at the date of acquisition; and

    • (d) in the case of a prescribed debt obligation described in paragraph (1)(d), the maximum amount of interest thereon that could be payable thereunder in respect of that year.

  • (3) For the purpose of this section, any bonus or premium payable under a debt obligation is considered to be an amount of interest payable under the obligation.

  • (4) For the purposes of this section, where

    • (a) a taxpayer has an interest in a debt obligation (in this subsection referred to as the “first interest”) under which there is a conversion privilege or an option to extend its term upon maturity, and

    • (b) at the time the obligation was issued (or, if later, at the time the conversion privilege or option was added or modified), circumstances could reasonably be foreseen under which the holder of the obligation would, by exercising the conversion privilege or option, acquire an interest in a debt obligation with a principal amount less than its fair market value at the time of acquisition,

    the subsequent interest in any debt obligation acquired by the taxpayer by exercising the conversion privilege or option shall be considered to be a continuation of the first interest.

  • (5) For the purposes of making the computations referred to in paragraphs (2)(a), (b), (c) and (c.1), the compounding period shall not exceed one year and any interest rate used shall be constant from the time of acquisition or issue, as the case may be, until the time of maturity, surrender or retraction.

  • (6) For the purpose of the definition investment contract in subsection 12(11) of the Act, a registered retirement savings plan or a registered retirement income fund, other than a plan or fund to which a trust is a party, is a prescribed contract throughout a calendar year where an annuitant (as defined in subsection 146(1) or 146.3(1) of the Act, as the case may be) under the plan or fund is alive at any time in the year or was alive at any time in the preceding calendar year.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/83-864, s. 1
  • SOR/85-696, s. 19
  • SOR/86-1092, s. 17(F)
  • SOR/96-225, s. 1
  • SOR/96-227, s. 1
  • SOR/96-435, s. 3
  • SOR/2001-295, s. 4(F)
 
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