Respecting a question on the possibility of reducing income tax source deductions where payment is made to a member of a pooled registered pension plan ( "PRPP"), the participant is an Indian under the Indian Act, and the contributions came from exempt earned income, CRA first indicated that although the distribution would first be included in the participant’s income under s. 56(1)(z.3), it would “then be excluded, where applicable, from income when applying paragraph 81(1)(a),” and then stated, “the fact that paragraph 81(1)(a) would apply to income of an Indian does not release the payor of its responsibilities to deduct or withhold sums as prescribed in respect of that income.” Respecting the procedure for relief under s. 153(1.1), it stated:
Generally, the participant must submit Form T1213…to the Taxpayer Services Division of the Tax Services Office with an explanation. However, the participant may choose to send a letter containing all the information required instead of the form. If the request is accepted, the participant will provide the payor with a copy of the letter of authorization from the CRA for the reduction of withholding for the year.