preview

Benefits Of Registered Pension Plan Essay

Decent Essays

(a) owns, directly or indirectly, not less than 10 per cent of the issued shares of any class of the capital stock of the employer or of any other corporation that is related to the employer,
(b) does not deal at arm’s length with the employer.
There are important tax considerations for an IPP. Rules dictate the tax-deductible amounts with respect to contributions for both past and current service benefits and annual withdrawals. These are more closely discussed below.

Taxation Considerations
(A) Tax-Deductible Contributions and other considerations
Subject to certain conditions, registered pension plan (e.g. IPP) contributions by employers are deductible for the employer (during the year or within 120 days after year end) for purposes of computing taxable income subject to certain conditions. Generally, prescribed contributions are eligible for deductibility; however, rules governing these contributions are limited in scope to defined RPPs and not applicable to designated plans which more often that not, an IPP is. Therefore, in order for employer IPP contributions to be eligible for deduction, they must satisfy certain prescribed conditions as set forth in subsection 147.2(2). To reiterate an earlier point, in effort by the government to eliminate aggressive tax minimization through deduction schemes, the prescribed conditions aim to restrict aggressive funding of individual pension plans without regard for the funded status of the plan. . One way the CRA achieves this

Get Access