Important proposed changes to RRSP rules Coop
By Hazel Corcoran
If people in your cooperative hold shares in a self-directed RRSP, there are two important updates that CTCF like to bring to your attention. These updates are relevant in cases where one (or more) holder (s) (and its related persons) shares held (owned) 10% or more of any class of shares issued by the cooperative to 23 March 2011, with shares in an RRSP. People in this situation are eligible for the transitional regime (which means they do not have to pay the tax penalty), and the rules of the transition have been changed for the better.
Previously, in order to benefit from these relief measures, the eligible individual must file an election with the tax authorities no later than 30 June 2012, by filing Form RC341 to the Canada Revenue Agency. The penalty tax exemption period lasted 10 years.
The two amendments that have been proposed by Finance Canada is to change the deadline for filing the Form RC341 to 1 March 2013 , and also to remove the 10-year expiration date for this plan. If you are eligible, this means you do not need to withdraw your capital of the cooperative by 2022, capital can remain indefinitely, as long as you have posted the required form, or you drop by 1 March 2013. Note that in a year when there are gains paid on your shares, you must remove within 90 days following the end of the year and pay tax on those earnings. (This rule was already in place.) See: http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ntvdnc/rlf-fra.html.
Guide for the Quebec Federation of Forestry Cooperatives RRSP changes written in March 2012, click on this link. There may be other changes that are relevant for cooperatives that use the Coop RRSP. We continue to work with the cooperative sector organizations on this issue and we will keep you abreast of news.
There are two qualifications for such information. The first is that these changes are currently only legislative proposals. See: http://www.fin.gc.ca/drleg-apl/ita-lrir-dec12-l-fra.asp . However, since the changes are proposed by the government, it seems very likely that they will be adopted. The second qualification is that the members of the CFTC staff are not tax experts. If you are affected by changes in Coop RRSPs, we encourage you to consult a tax professional.
Technical information:
The relevant sections of the bill is available here, and an explanatory note is available here. At each link, see:
1) Paragraph 35 (Transitional Income) about the date change « before March 2, 2013. »
2) Section 207.01 (12) – definition of « transitory income from a prohibited investment » , and Note that the words « before 2022 », which was previously in this article have been removed.