Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
Whether US cash a qualified investment for RRSP purposes.
Position: No.
Reasons:
Although US currency is a non-qualified investment, there is no requirement that an RRSP dispose of a non-qualified investment. There may be tax consequences, however, if a non-qualified investment is held in the RRSP. After June 27, 1999, certain foreign currency and deposits thereof will be a qualified investment for an RRSP, RRIF and RESP - proposed by August 8, 2000 legislation under Finance release #2000-059.
Signed on October 11, 2000
XXXXXXXXXX
Dear Colleague:
I am replying to correspondence of July 7, 2000, from XXXXXXXXXX, addressed to Mr. Ajay Chopra of my office, on behalf of your constituent, XXXXXXXXXX , concerning the qualified investment rules for Registered Retirement Savings Plans (RRSPs).
In his letter, XXXXXXXXXX raised concerns about a trust governed by an RRSP which may buy and sell foreign-denominated investments from time to time. He wishes to know if the RRSP trust must convert foreign currency into Canadian dollars when the investment is sold, and convert Canadian dollars to foreign currency prior to purchasing another such investment. Each conversion has a cost and thus reduces the assets in the RRSP available for retirement.
There is no requirement in the Income Tax Act that foreign currency held by an RRSP be converted to Canadian currency. However, because foreign currency is not a qualified investment for a trust governed by an RRSP, there may be tax consequences if foreign currency is held.
When a trust governed by an RRSP acquires property which is a non-qualified investment, such as foreign currency, the fair market value of this investment must be included in the income of the annuitant, pursuant to subsection 146(10) of the Act. However, by virtue of subsection 146(6) of the Act, on disposition of the non-qualified investment the annuitant will get a deduction equal to the lesser of the proceeds of disposition and the amount previously included in income under subsection 146(10) of the Act. Therefore, there are generally no income tax implications for the annuitant when the foreign currency is disposed of within the same calendar year and there has been no fluctuation in the exchange rate. Accordingly, the Canada Customs and Revenue Agency will not apply these provisions where foreign currency is converted to Canadian currency or is used to acquire a qualified investment within a reasonable period of time (usually one month).
I am also pleased to inform you that on August 8,2000, the Department of Finance announced proposed legislation which will generally allow RRSPs to hold foreign currency as a qualified investment after June 27, 1999.
I trust that my comments will assist you in replying to your constituent.
Yours sincerely,
Martin Cauchon
W. Harding
August 29, 2000
957-9769
2000-004025
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 2000
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 2000
Email this Content