Principal Issues: Whether an individual can contribute to his FHSA an amount withdrawn from his RRSP under the HBP.
Position: Yes.
Reasons: Nothing in the Act prevents one from doing so. The Parliament's intent was to allow an individual to benefit from both the FHSA and the HBP for the same qualifying home.
May 15, 2023
XXXXXXXXXX 2023-096526
Dear Mr. XXXXXXXXXX,
Subject: Amounts withdrawn under the HBP and CELIAPP
The Deputy Commissioner of the Legislative Policy and Regulatory Affairs Branch of the Canada Revenue Agency has asked us to respond to your email of February 8, 2023, received from the office of the Honourable Diane Lebouthillier, Minister of National Revenue, to which it was first forwarded.
In your email, you asked whether it is possible for an individual to withdraw $8,000 from a registered retirement savings plan ("RRSP") pursuant to the home buyers' plan ("HBP") and contribute the amount withdrawn to a first home savings account ("FHSA"), knowing that the individual will be purchasing a qualifying home the following month.
We have assumed for the purposes hereof that all three transactions would occur in the same calendar year.
We have also assumed that neither the individual nor the individual’s spouse or common-law partner, if any, would have owned a home as an owner-occupant in the past until the acquisition of the qualifying home.
Our Comments
This technical interpretation provides general comments on provisions contained in the Income Tax Act (the "Act") (footnote 1). It is not intended to confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC70-6R12, Advance Income Tax Rulings and Technical Interpretations.
When the FHSA measures were announced in the 2022 Budget, it was announced that it would not be possible for an individual to make both an FHSA withdrawal and an RRSP withdrawal under the HBP for the acquisition of the same qualifying home. However, this restriction has been dropped and does not appear in the Act (footnote 2).
It is therefore possible for an individual to use both amounts withdrawn from an RRSP under the HBP and amounts withdrawn from an FHSA for the acquisition of the same qualifying home.
It is also possible for an individual to use amounts withdrawn from the individual’s RRSP under the HBP to contribute those amounts to a FHSA when all the conditions for the application of the HBP and the FHSA are satisfied. In such a case, the individual could then withdraw those amounts from the individual’s FHSA for the purpose of acquiring the qualifying home, provided that all the conditions are satisfied.
In such a case, it should be remembered that the rules applicable to the HBP and the FHSA present several differences despite certain similarities. In particular, the individual should consider the rules relating to the opening of a FHSA (footnote 3), the rules relating to the withdrawal of an eligible amount under the HBP (footnote 4) and the rules relating to a qualifying withdrawal from a FHSA (footnote 5), with respect to those transactions likely occurring at separate times.
In the hypothetical situation you described, it should be noted that, for an individual's withdrawal of an amount from the individual’s RRSP to constitute the withdrawal of an eligible amount under the HBP, the individual would have to have entered into a written agreement to acquire the qualifying home before the withdrawal was made. The individual would also have to acquire the home or a replacement property before October 1 of the calendar year following the receipt of the eligible amount withdrawn under the HBP.
In addition, since the FHSA contribution and the qualifying withdrawal from the FHSA would be made after the HBP withdrawal, certain conditions relating to the FHSA require special consideration. In particular, the individual would have to have opened a FHSA prior to becoming an owner-occupant of the qualifying home. In addition, since the individual would be acquiring the home within one month of contributing to the FHSA, it should be noted that the individual should at least ensure that the individual does not make a qualifying withdrawal from the FHSA more than 30 days after acquiring the qualifying home.
The $8,000 contributed to the FHSA could be deducted from the individual's income, under the prescribed conditions, even though it was made from withdrawals from the individual's RRSP under the HBP. These FHSA contributions would be treated like any other contribution. The individual would also have to ensure that the eligible amount withdrawn under the HBP is repaid to the individual’s RRSP within the time and manner provided by the Act.
We hope that our comments are of assistance.
Best regards,
Mélanie Beaulieu
Manager
Financial Industries and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
FOOTNOTES
Note to reader: Because of our system requirements, the footnotes contained in the original document are shown below instead:
1 Unless otherwise indicated, statutory references herein are to provisions of the Act.
2 The FHSA measures were introduced by S.C. 2022, c. 19, s. 31.
3 In particular, the definitions "qualifying arrangement" and "qualifying individual" in subsection 146.6(1), to the extent that the individual would not already have a FHSA before making a withdrawal under the HBP.
4 In particular, the definitions "regular eligible amount" and "supplemental eligible amount" in subsection 146.01(1), as well as the definitions "replacement property" and "completion date".
5 In particular, the definition "qualifying withdrawal" in subsection 146.6(1).