Principal Issues: Is interest paid by the bank the amount required to be included in income of the deposit holders?
Position: Generally yes
Reasons: All deposit holders will be paid at the same rate for the same type of accounts.
XXXXXXXXXX 2009-034246
XXXXXXXXXX , 2009
Dear XXXXXXXXXX :
Re: XXXXXXXXXX (the "Bank") BN XXXXXXXXXX
This is in reply to your letter of XXXXXXXXXX and is further to our Ruling 2008-026648 (the "Ruling") dated XXXXXXXXXX , 2008 wherein you requested a supplemental advance income tax ruling on behalf of the Bank's proposed "Performance Offset Mortgage" or "POM" product. The amendment involves the expansion of the definition of "Deposit Accounts", which may be "linked" to a customer's POM, to include fixed- term accounts and investments as well as Guaranteed Investment Certificates ("GICs").
In the Ruling, the phrase "Deposit Accounts" in (c) of the Definitions was defined as including all chequing accounts and all savings accounts offered by the Bank. Fixed term accounts or investments, GICs, deferred income and special income arrangements described in Division G of the Income Tax Act (Canada) (the "Act") as well as mutual funds were excluded from the definition of "Deposit Accounts".
The definition of "Deposit Account" in paragraph(c) of the Definitions in the Ruling is hereby amended to read as follows:
"Deposit Account" means any savings or chequing account, fixed term account or investments, and Guaranteed Investment Certificates ("GICs") regularly offered by the Bank to the public, either as a sole account held by one individual alone or a joint account held by two or more individuals together, which pays interest at a standard posted interest rate (as amended from time to time) regardless of whether the deposits are payable to the Customer(s) at any time at the Customer(s)' request or are not payable with full interest or at all, to the Customer(s), until a fixed maturity date. For greater certainty, Deposit Accounts shall include the following:
(i) All chequing accounts;
(ii) All savings accounts;
(iii) Fixed term accounts or investments regularly offered by the Bank which are not, by the legal terms of the investment, payable with full interest and/or payable at all to the Customer until a fixed future date; and,
(iv) GICs whether fixed term or redeemable prior to maturity.
For greater certainty, Deposit Accounts shall not include:
(v) Deferred income plans and other special income arrangements described in Division G of the Act including Employee Profit Sharing Plans, Tax Free Savings Accounts, Registered Retirement Savings Plans, Deferred Profit Sharing Plans and Registered Retirement Income Funds; and
(vi) Mutual Funds;
The CRA confirms that all of the rulings provided in the Ruling shall continue to apply to the Bank in the manner set out in the Ruling with the amended definition of "Deposit Account" above and are binding on the CRA provided that the Bank implements a transaction, under the Proposed Transactions discussed in 13 in the Ruling, that links one of the new elements in the amended definition of "Deposit Account" to a customer's POM within 12 months of the date of this letter.
Yours truly,
XXXXXXXXXX
for Director
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch