Principal Issues: 1) Must bullion purchased by an RRSP trust be held in Canada? 2) Who qualifies to sell bullion? 3) How are the bullion sales reported? 4) Is there a maximum amount of bullion that a plan can buy?
Position: 1) No. 2) Royal Canadian Mint or specified corporations for coins, the metal refiner or specified corporations for bar, ingot or wafer. 3) The Act imposes no special reporting requirements. 4) There is no limit.
Reasons: 1) The Act is silent. 2) 4900(1)(t)(iv) and 4900(1)(u)(iv). 3) The Act is silent. 4) The Act is silent.
Angela Best Royal Canadian Mint Bullion & Refinery Services 2005-015749 320 Sussex Drive P. Kohnen, CMA Ottawa ON K1A 0G8
December 5, 2005
Dear Ms. Best:
Re: Technical Interpretation - Bullion as a Qualified Investment
This is in response to your electronic submission of November 3, 2005 and our recent telephone conversation (Best/Kohnen) in which we discussed several questions you have concerning the introduction of bullion as a qualified investment for a registered retirement savings plan ("RRSP"). You have noted that your organization does not currently market bullion certificates, but does sell bullion coins, wafers and bars.
Our comments
New paragraphs 4900(1)(t), (u) and (v) of the Income Tax Regulations (the "Regulations") were recently promulgated by SOR/2005-264 dated August 31, 2005 and published in Part II of the Canada Gazette, Vol. 139, No. 19 on September 21, 2005. These paragraphs, which are applicable after February 22, 2005, provide that, subject to certain conditions, investments in gold and silver bullion coins, bars and certificates will be qualified investments for RRSPs, as well as certain other deferred plans.
Paragraph 4900(1)(t) of the Regulations provides that a legal tender gold or silver bullion coin will be a qualified investment at a particular time if it:
i) has a minimum purity of 99.5% for gold and 99.9% for silver,
ii) was produced by the Royal Canadian Mint,
iii) has a fair market value that does not exceed 110% of the fair market value of its gold or silver content, and
iv) is acquired by the deferred plan trust either directly from the Royal Canadian Mint or from a corporation (hereafter referred to as a "specified corporation").
Note that the condition in iii) above is ongoing in that it must be met for as long as the deferred plan trust holds the coin, and is designed to ensure that the coin is not held by the plan for its numismatic value.
A specified corporation, is defined for the purposes of paragraphs 4900(1)(t), (u) and (v) of the Regulations as a Canadian-resident corporation that is a bank, trust company, credit union, insurance corporation or registered securities dealer whose business activities are regulated by the Superintendent of Financial Institutions or a similar provincial authority.
Paragraph 4900(1)(u) of the Regulations provides that a gold or silver bullion bar, ingot or wafer will be a qualified investment if it:
i) meets the same purity standards of 99.5% for gold and 99.9% for silver, as are noted above for coins,
ii) was produced by a metal refiner that is accredited by the London Bullion Market Association,
iii) bears the hallmark of the refiner that produced it and is stamped with its fineness and weight, and
iv) is acquired directly from the refiner or from a specified corporation.
The Income Tax Act (the "Act") does not specifically require that the bullion referred to above be held in Canada, however, it will be a question of fact as to whether it has been acquired by the deferred plan in question. We would anticipate that the plan trustee would exercise due diligence in using a custodial trustee for such assets.
The Act does not impose any additional reporting requirements on the seller of the bullion (the Royal Canadian Mint or the specified corporation, as the case may be) in respect of the sale of bullion to an RRSP or other deferred plan trust. Furthermore, the Act does not impose a maximum level of investment by such plan trusts in bullion.
We trust that the above comments will be of assistance to you. Please feel free to contact Phil Kohnen at (613) 957-2093 should you require further information.
Yours truly,
Mary Pat Baldwin, CA
for Director
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate