DEC 20 1988
P2/66/87 O. Laurikainen (613) 957-2125
Dear Sirs:
RE: Retirement Compensation Arrangements
A retirement compensation arrangement is an employee compensation plan where payments made by the employer to the plan custodian and any income and capital gains earned by the plan, are subject to a 50% refundable tax. The contributions are a tax deductible expense for the employer. The tax is fully refunded when benefits are subsequently distributed by the plan to its beneficiaries. The custodian however, is required to withhold tax on payments made out of the plan to a beneficiary at normal rates for salaries. The purpose of this advance tax is to ensure that only certain Canadian plans, such as "registered pension plans", "registered retirement savings plans" and "deferred profit sharing plans" will benefit through tax deferral.
Attached are copies of related legislation and explanatory notes. We trust that the foregoing will be of assistance to you.
Yours truly,
for Director Reorganizations and Non-Resident Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch