On his retirement in 2017, the beneficiary (X) of a retirement compensation arrangement (RCA) set up by his employer was entitled to receive a $50,000 retiring allowance from the RCA. In Scenario 1, his RRSP deduction limit for his 2017 taxation year as confirmed by his notice of assessment for his 2016 taxation year, was $75,000, and in Scenario 2, such confirmed deduction limit was $30,000 and the eligible portion of the retiring allowance qualifying for the s. 60(j.1) deduction was $20,000.
After noting that Reg. 100(3)(c) provided that remuneration paid by an employer is reduced where a portion of such amount is paid as a premium under an RRSP to the extent that the employer believes on reasonable grounds that the premium is deductible under ss. 60(j.1), 146(5) or (5.1) in computing the employee’s income for that taxation year, in which the payment of remuneration is made, CRA found that there should be no withholding obligation on the custodian of the RCA in either Scenario on payment of the retiring allowance to the RRSP, stating:
The facts establish that the entire amount from the RCA was paid to X's RRSP, and that the Custodian had reasonable grounds to believe that the entire amount ($50,000) was deductible under subsection 146(5) (Scenario 1) or that part of the amount ($20,000) was deductible under paragraph 60(j.1) and that the other part of the amount ($30,000) was deductible under subsection 146(5) (Scenario 2).