The February 23, 2005 federal budget proposed the repeal of the 30% foreign property limit for pension funds and certain other deferred income plans, including RRSPs (Deferred Plans) retroactive to the start of the year.

There has been some uncertainty as to how Canada Revenue Agency (CRA) would treat Deferred Plans that exceed the limit in reliance on the budget if the proposed repeal is not ultimately passed.

The CRA Commissioner recently told the Parliamentary Standing Committee on Finance that it would administer the measure as though it had immediate effect, which is consistent with CRA's customary budget practice. The Commissioner stated, in particular:

"If the law is not approved by Parliament, [Deferred Plans] might have to do some readjustment to their investments but [CRA] would not ... impose a penalty on [Deferred Plans] that in good faith have followed ... the announced budget measures as of the time of the budget until Parliament ... makes an explicit decision that it is not the desire of Parliament." (our emphasis)

The comments of the CRA Commissioner provide welcome clarification of CRA's intended assessing practice for Deferred Plans that have been relying on the budget announcement.  

Please do not hesitate to call Ron Wilson (416-863-5584) or Claire Kennedy (416-367-6977) if you have any questions concerning these comments or if you would like any additional information.

Davies Ward Phillips & Vineberg LLP, with over 225 lawyers, practices nationally and internationally from offices in Toronto, Montréal, New York  and Paris, and is consistently at the heart of the largest and most complex commercial and financial matters on behalf of its North American and overseas clients.

The information and comments contained herein are for the general information of the reader and are not intended as advice or opinions to be relied upon in relation to any particular circumstances.  For particular applications of the law to specific situations, the reader should seek professional advice.