Principal Issues: Is the foreign content limit for RRSPs applied to the total property held in all RRSP trusts of an annuitant?
Position: No.
Reasons: Section 206 of the Act clearly provides that the foreign content limit is applied to each RRSP trust separately.
XXXXXXXXXX 2004-009746 G. Allen October 15, 2004
Dear XXXXXXXXXX:
Re: Foreign Property in Registered Retirement Savings Plans (RRSPs)
We are writing in reply to your letter dated April 20, 2004 to the Summerside Taxation Centre concerning the excess foreign property held in one of your RRSPs, even though the total foreign content held by all of your RRSPs would be less than the 30% foreign content limit permitted under the Income Tax Act (the "Act").
Pursuant to paragraph 205(b) of the Act, the Part XI tax on excess foreign property is assessed separately against each trust governed by an RRSP. In general, subsection 206(2) of the Act provides that where at the end of any month after 2000 the total of the cost amount to an RRSP trust of foreign property exceeds 30% of the cost amount to the RRSP trust of all property held at that time, the RRSP trust is subject to a tax of 1% of the lesser of the excess and the total of the cost amounts of all its foreign property. Consequently, it is the property in each individual RRSP trust that is subject to the limits imposed by subsection 206(2) of the Act and not the aggregate property held in all of the RRSP trusts of an annuitant.
In our view, should the Part XI tax be amended to apply on an aggregate basis, the Part XI tax would be very difficult for the trustees or the Canada Revenue Agency ("CRA") to administer. Where an annuitant has several RRSPs with different trustees, the most obvious problems that we could identify are as follows:
? How would one RRSP trust know that the annuitant also has other RRSP trusts?
? Where there are several RRSP trusts, how would each RRSP trust know the cost amount of the property held by the other RRSP trusts?
? Which particular RRSP trust would be subjected to the Part XI taxes should the aggregate foreign property held by all of the RRSP trusts exceed the limits allowed under the Act?
? Where the Part XI taxes are not paid, which RRSP trust would be subjected to the applicable tax?
The CRA and the trustees of each particular RRSP trust can properly administer the current provisions of Part XI of the Act, as each RRSP trust is only responsible for the property it holds.
We trust our comments will be of assistance to you.
Yours truly,
Roberta Albert, CA
for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Planning Branch