Tax payable on an advantage
The 100% tax on advantages generally applies to transactions occurring, income earned and capital gains accruing after March 22, 2011.
If the annuitant or a person not dealing at arm's length with the annuitant (including the annuitant's RRSP or RRIF) was provided with an advantage in relation to their RRSP or RRIF during the year, a tax is payable which is:
- in the case of a benefit, the fair market value (FMV) of the benefit;
- in the case of a loan or a debt, the amount of the loan or debt; and
- in the case of an RRSP strip, the amount of the RRSP strip.
The tax is payable by the RRSP or RRIF annuitant, unless the advantage is extended by the financial institution, in which case it is payable by the financial institution.
An annuitant subject to this tax is required to file Form RC339, Individual Return for Certain Taxes for RRSPs or RRIFs for Tax Year 20__. The return must be filed no later than June 30 of the following year. Any tax owing must also be paid by that date. For payment remittance options, see Make a payment.
The Department of Finance extended the deadline for filing Form RC341, Election on Transitional Prohibited Investment Benefit for RRSPs or RRIFs, from June 30, 2012 to March 1, 2013. However, there is no indication at this time that this election will be extended beyond the 2012 tax year. For updates on the extension of the transitional relief election, go to What's new for RRSPs and related plans.
A swap transaction is expressly included in the list of transactions that are treated as an advantage, with effect from July 1, 2011. Swap transactions that are undertaken to remove an investment from an RRSP or RRIF that would otherwise result in tax under Part XI.01 if left in the plan are permitted to continue to occur until the end of 2021.
The Department of Finance has proposed that the transitional period "until the end of 2021" be extended indefinitely.
An exception to the swap rules is provided to allow individuals to "swap-out" a non-qualified or prohibited investment that was subject to the new 50% tax. To qualify under this exception, the individual must be entitled to a refund of the tax on disposition of the investment (generally inadvertent cases that are promptly resolved). In addition, we will extend this exception, on an administrative basis, to cover swaps of non-qualified investments that were subject to the pre-March 23, 2011 rules, provided that the conditions applicable to a refund are met.
Forms and publications
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