Chapter History S2-F1-C2, Retiring Allowances

Introduction

The purpose of a Chapter History page is to highlight any amendments to the information contained in an interpretation bulletin that is now reflected in a chapter of an income tax folio as well as to identify any subsequent amendments to a folio chapter. It outlines amendments that have been made as a result of legislative changes and proposed legislative changes, precedential court decisions, as well as new or revised interpretations of the Canada Revenue Agency (CRA).

Except as otherwise noted, all statutory references herein are references to provisions of the Income Tax Act, R.S.C., 1985, c.1 (5th Supp.), as amended and all references to a Regulation are to the Income Tax Regulations, C.R.C., c. 945, as amended.

Update November 8, 2016

General

Income Tax Folio S2-F1-C2, Retiring Allowances, replaces and cancels Interpretation Bulletin IT-337R4 (Consolidated), Retiring Allowances.

In addition to consolidating the content of the former interpretation bulletin, general revisions have been made to improve readability. Any substantive technical and interpretive changes to the information outlined in the former interpretation bulletin are described below.

Legislative and other changes

¶2.1 has been added to list several terms as they are used throughout the Chapter.

¶2.4 has been added to comment on situations in which a retiring allowance does not originate with the individual’s employer.

¶2.10 (formerly included in ¶7 of IT-337R4) has been expanded to provide an example of the requirements for a payment received in advance of a loss of employment to qualify as a retiring allowance.

¶2.13 (formerly included in ¶8(b) of IT-337R4) has been revised to remove the instructions for the employer and the employee to file a joint application with the Income Tax Rulings Directorate in the form of an advance income tax ruling as this practice is uncommon.

¶2.19 has been added to comment that an ex-gratia or voluntary payment made in respect of a loss of employment will be considered a retiring allowance.

¶2.23 has been added to comment on a situation where a payment is made in lieu of accrued severance benefits.

¶2.24 (formerly included in ¶15 of IT-337R4) has been revised to remove a reference to an amount received on or after retirement where a low (or no) salary was received by the individual before retirement. This situation could also involve the application of the salary deferral arrangement rules and is beyond the scope of an income tax folio dealing with retiring allowances.

¶2.29 and 2.30 (formerly ¶19 and ¶20 of IT-337R4) have been revised to limit the discussion to transfers to an RRSP. Transfers to an RPP are uncommon due to adverse implications relating to an individual’s pension adjustment or past service pension adjustment.

¶ 2.31(c) (formerly included in ¶22(c) of IT-337R4) has been revised to remove an example relating to an employer-sponsored retirement plan where a fraction of employer contributions vested over a seven year period. The example no longer reflects pension benefits standards legislation. 

¶2.32 (formerly included in ¶23 of IT-337R4) has been revised to remove a discussion on the deductibility requirements under paragraph 60(o.1) relating to legal fees incurred to collect or establish a right to a retiring allowance. This information is contained in Interpretation Bulletin IT-99R5, Legal and Accounting Fees.

¶2.33 (formerly included in ¶24 to 26 of IT-337R4) has been revised to remove a discussion on the deductibility requirements for a payer of a retiring allowance, details on reporting and withholding requirements if a retiring allowance is paid to a Canadian resident or a non-resident individual. This information is contained in Guides T4001, Employers’ Guide – Payroll Deductions and Remittances and T4061, NR4 – Non-Resident Tax Withholding, Remitting and Reporting.