CLARITY OBTAINED ON TAX TREATMENT OF REGISTERED PLAN INVESTMENT MANAGEMENT FEES
In 2016, the Canada Revenue Agency (CRA) indicated it would look to apply an “advantage tax” equal to 100 per cent on investment management fees pertaining to registered plans, but paid for by the annuitant using funds from outside the plan. The IIAC advocated against such a move, arguing that such fee arrangements are done as a matter of convenience for taxpayers and not for the purpose of tax avoidance. The CRA subsequently deferred implementing the Advantage Rules, pending further review by the federal Department of Finance.
In a recent letter to the CRA, the Department of Finance confirms it has no tax policy concerns with the payment of investment management fees directly by the plan annuitant and will recommend clarifying changes to tax legislation. The IIAC welcomes the decision and the certainty the legislative changes will provide taxpayers and the investment industry.