Exempt Top-Up RCAs from Schedule 15 Reporting Requirements
The added administrative burden and cost of imposing enhanced reporting requirements on trusts and funds that are already strictly regulated will not improve the effectiveness of the tax system.
In a nutshell
New trust reporting requirements are part of the enhanced tax reporting obligations introduced under Bill C-32, which aims to counter tax avoidance, tax evasion, money laundering, and other financial crimes. However, certain trusts, including registered pension plans (RRPs), are exempt because they are highly regulated under the Income Tax Act (ITA). The Ontario Bar Association’s Pensions and Benefits Law Section argues that retirement compensation arrangements to top up pension savings (known as Top-Up RCAs) and other employment-related trusts should be exempt, too. The CBA’s national Section endorses this position.
Following the rationale for exemption
Currently, trustees who file a T3 Return must complete Schedule 15 to report beneficial ownership information (Schedule 15 Reporting Requirements), unless an exemption applies. Given the low risk of non-compliance by RPP administrators and their beneficiaries, the CRA exempted RPPs from the additional administrative burden and costs associated with what are known as Schedule 15 Reporting Requirements.
The OBA points out that retirement compensation arrangements, or RCAs, are often used to “top up” registered pension plans. Therefore, they should be exempt from the new reporting requirements since they are often considered integrated plans. Forcing administrators of top-up CRAs plans to complete Schedule 15 “could indirectly apply the Schedule 15 Reporting Requirements to the entire membership of the underlying RPP, which is inconsistent with the current legislative scheme to exempt RPPs from the Schedule 15 Reporting Requirements,” the Section explains.
Other employment-related trusts
Also, while several employment-related trusts are already exempt from Schedule 15 Reporting Requirements, some are not, such as employee benefit plans, employee trusts, vacation pay trusts, foreign retirement arrangements, retirement compensation arrangements, and unregistered supplementary unemployment benefit plans.
Given the existing reporting obligations for these trusts and the very low risk of non-compliance, imposing the Sections agree that the additional administrative burden and cost of Schedule 15 Reporting Requirements are unnecessary. These trusts, along with training and strike funds, should also be exempt.
Read the submission.
