Canada Adopts New Pension Tax Treatment Rules

September 23, 2005 ( - The Canadian government has adopted a series of tax changes for deferred income pension plans including steps to eliminate foreign property restrictions.

The Department of Finance published the final regulations September 21 that were first outlined in the nation’s 2003 and 2005 budgets, according to a BNA report.

Changes in the Regulations Amending the Income Tax Regulations (Deferred Income Plans) covering the tax treatment of registered retirement savings plans (RRSPs), registered retirement income funds (RRIFs), registered education savings plans (RESPs), and deferred profit-sharing plans (DPSPs) include the:

  • repeal of exceptions provided to penalty taxes imposed on excess foreign property held by trusts and other tax-exempt entities governed by registered pension plans and deferred income plans, repeal of reporting requirements for foreign property holdings, and amendment of rules governing investments in small businesses. These charges were made in response to the government’s decision to eliminate foreign property limits for deferred income plans (See   Canadian Pension Plan’s Foreign Investment Limit Lifted  ).
  • addition of new types of investments to the list of those qualified for inclusion in RRSPs, RRIFs, RESPs, and DPSPs, including debt obligations issued by Canadian corporations or trusts resident in Canada, asset-backed securities, and certain investments in gold and silver bullion coins, bars, and certificates
  • establishment of a mechanism to deal with excess contributions to DPSPs that arise in certain situations – generally by allowing excess contributions to be ignored in determining an individual’s DPSP pension credit for a specific tax year.

The September 21 issue of the Canada Gazette where the new regulations were unveiled is  here .