CRA explains delay in fee position, previews folio on advantage rules

Advisors, thank your industry associations – they’re partly why CRA pushed implementation of its registered fee position to January 2019.

“We’re still discussing with stakeholders and reviewing data,” says Stéphane Charette, acting director, Financial Industries and Trusts Division at the Income Tax Rulings Directorate at CRA. “We felt we were getting very close to the deadline [which was originally Jan. 1, 2018], so it would be a good thing for the industry and for us to postpone for a year. That way we can […] finish the discussion process with the industry and stakeholders.”

Charette adds he expects the consultations, which have thus far involved IFIC, IIAC and CLHIA, to extend into 2018. As a result, he can’t say when CRA will release its detailed position on registered fees paid out of open accounts.

Asked how much notice is ideal prior to implementation, he says, “I’d like to give enough information to make sure all the issuers are going to be able to make any changes required on time.” But there are limits.

“I don’t see us pushing it again by another year,” he says. “I think that’s unreasonable.”

Read: CRA to tax registered investment fees paid from open accounts

Advantage folio coming

CRA’s registered fee position is meant to be part of a broader, forthcoming folio on registered plan advantages.

“The announcement we made in November [at the Canadian Tax Foundation roundtable] was that when we were doing this folio on the implementation of the advantage rules, these issues came up on the fees,” explains Mary Pat Baldwin, manager, Deferred Income Plans Section, at the Income Tax Rulings Directorate. “In fact, [the registered fee position] is only five paragraphs out of 12 pages.”

As a result, she says, “we’re going to release the folio, but there will be no information on the fees. We say in the folio that it will be updated once the information [has been] decided.”

Read: Why CRA should reconsider taxing RRSP fees paid from open accounts

The advantage release will be the third in what Baldwin calls a trilogy of folios about registered plans: parts one and two were the qualified investment folio and the prohibited investment folio.

Will part three contain new information? Baldwin says the advantage folio will cover CRA positions that have already been published, or issues CRA has looked at in the audit context. “It’s the official interpretation from CRA on the rules,” she says, adding there will be several examples. “It’s us trying to explain in one place what all the rules are, what the explanations are, and what is acceptable and what’s not.”

Both Charette and Baldwin say they hope the folio’s release will cause aggressive tax planners to change behaviour. But the document shouldn’t shock anyone.

“We don’t have the mandate to modify the legislation; only [the Department of] Finance can do that,” says Charette. “We [CRA] interpret the legislation based on the wording of it. That’s basically what the folio will do, is put it in layman’s terms what the legislation says.”

As for a release date, “The folio is under my review right now, so it shouldn’t be too long,” says Charette. He points out that once approved, the folio goes into a queue for publishing over which CRA has no control. Baldwin says, “We’re pushing for fall 2017.”

As with the pending registered fee position, the folio won’t have updates on how the advantage rules pertain to RESPs and RDSPs.

“One added twist was that Finance announced in [Budget] 2017 that they’re extending the rules to two other registered plans,” says Baldwin. “So the decision was made that we don’t have time to update for those two; we’re going to update after.”

Read: Help maximize RDSP carry forwards

Have your say

The best way to talk to CRA about its registered fee position before the folio is released is by emailing itrulingsdirectorate@cra-arc.gc.ca (not folios@cra-arc.gc.ca, as CRA previously told us). After the folio is published, there will be a three-month comment period — that’s when you can email the folios account.

Baldwin says the directorate is happy to accept individual feedback, but notes there could be duplication as CRA has been actively consulting with industry associations. Nonetheless, she says, “We want to hear from everyone.”

Melissa Shin

Melissa is the editorial director of Advisor.ca and leads Newcom Media Inc.’s group of financial publications. She has been with the team since 2011 and been recognized by PMAC and CFA Society Toronto for her reporting. Reach her at mshin@newcom.ca. You may also call or text 416-847-8038 to provide a confidential tip.