Income Tax Act

Marginal note:Definitions

• 146.2 (1) The following definitions apply in this section and in Part XI.01.

  distribution

  distribution

  distribution under an arrangement of which an individual is the holder means a payment out of or under the arrangement in satisfaction of all or part of the holder’s interest in the arrangement. (distribution)

  holder

  titulaire

  holder of an arrangement means

  • (a) until the death of the individual who entered into the arrangement with the issuer, the individual; and

  • (b) at and after the death of the individual, the individual’s survivor, if the survivor acquires

    • (i) all of the individual’s rights as the holder of the arrangement, and

    • (ii) to the extent it is not included in the rights described in subparagraph (i), the unconditional right to revoke any beneficiary designation made, or similar direction imposed, by the individual under the arrangement or relating to property held in connection with the arrangement. (titulaire)

  issuer

  émetteur

  issuer of an arrangement means the person described as the issuer in the definition qualifying arrangement. (émetteur)

  qualifying arrangement

  arrangement admissible

  qualifying arrangement, at a particular time, means an arrangement

  • (a) that is entered into after 2008 between a person (in this definition referred to as the “issuer”) and an individual (other than a trust) who is at least 18 years of age;

  • (b) that is

    • (i) an arrangement in trust with an issuer that is a corporation licensed or otherwise authorized under the laws of Canada or a province to carry on in Canada the business of offering to the public its services as trustee,

    • (ii) an annuity contract with an issuer that is a licensed annuities provider, other than a contract that is adjoined to another contract or arrangement, or

    • (iii) a deposit with an issuer that is

      • (A) a person who is, or is eligible to become, a member of the Canadian Payments Association, or

      • (B) a credit union that is a shareholder or member of a body corporate referred to as a “central” for the purposes of the Canadian Payments Act;

  • (c) that provides for contributions to be made under the arrangement to the issuer in consideration of, or to be used, invested or otherwise applied for the purpose of, the issuer making distributions under the arrangement to the holder;

  • (d) under which the issuer and the individual agree, at the time the arrangement is entered into, that the issuer will file with the Minister an election to register the arrangement as a TFSA; and

  • (e) that, at all times throughout the period that begins at the time the arrangement is entered into and that ends at the particular time, complies with the conditions in subsection (2). (arrangement admissible)

  survivor

  survivant

  survivor of an individual means another individual who is, immediately before the individual’s death, a spouse or common-law partner of the individual. (survivant)

• Marginal note:Qualifying arrangement conditions

  (2) The conditions referred to in paragraph (e) of the definition qualifying arrangement in subsection (1) are as follows:

  • (a) the arrangement requires that it be maintained for the exclusive benefit of the holder (determined without regard to any right of a person to receive a payment out of or under the arrangement only on or after the death of the holder);

  • (b) the arrangement prohibits, while there is a holder of the arrangement, anyone that is neither the holder nor the issuer of the arrangement from having rights under the arrangement relating to the amount and timing of distributions and the investing of funds;

  • (c) the arrangement prohibits anyone other than the holder from making contributions under the arrangement;

  • (d) the arrangement permits distributions to be made to reduce the amount of tax otherwise payable by the holder under section 207.02 or 207.03;

  • (e) the arrangement provides that, at the direction of the holder, the issuer shall transfer all or any part of the property held in connection with the arrangement (or an amount equal to its value) to another TFSA of the holder;

  • (f) if the arrangement is an arrangement in trust, it prohibits the trust from borrowing money or other property for the purposes of the arrangement; and

  • (g) the arrangement complies with prescribed conditions.

• Marginal note:TFSA

  (3) If the issuer of an arrangement that is, at the time it is entered into, a qualifying arrangement files with the Minister, on or before the day that is 60 days after the end of the calendar year in which the arrangement was entered into, an election in prescribed form and manner to register the arrangement as a TFSA under the Social Insurance Number of the individual with whom the arrangement was entered into, the arrangement becomes a TFSA at the time the arrangement was entered into and ceases to be a TFSA immediately before the earliest of the following events:

  • (a) the death of the last holder of the arrangement,

  • (b) the arrangement ceasing to be a qualifying arrangement, and

  • (c) the arrangement not being administered in accordance with the conditions in subsection (2).

• Marginal note:Trust not taxable

  (4) No tax is payable under this Part by a trust that is governed by a TFSA on its taxable income for a taxation year, except that, if at any time in the taxation year, it carries on one or more businesses or holds one or more properties that are non-qualified investments (as defined in subsection 207.01(1)) for the trust, tax is payable under this Part by the trust on the amount that would be its taxable income for the taxation year if it had no incomes or losses from sources other than those businesses and properties, and no capital gains or capital losses other than from dispositions of those properties, and for that purpose,

  • (a) “income” includes dividends described in section 83; and

  • (b) the trust’s taxable capital gain or allowable capital loss from the disposition of a property is equal to its capital gain or capital loss, as the case may be, from the disposition.

• Marginal note:Amount credited to a deposit

  (5) An amount that is credited or added to a deposit that is a TFSA as interest or other income in respect of the TFSA is deemed not to be received by the holder of the TFSA solely because of that crediting or adding.

• Marginal note:Trust ceasing to be a TFSA

  (6) If an arrangement that governs a trust ceases, at a particular time, to be a TFSA,

  • (a) the trust is deemed

    • (i) to have disposed, immediately before the particular time, of each property held by the trust for proceeds equal to the property’s fair market value immediately before the particular time, and

    • (ii) to have acquired, at the particular time, each such property at a cost equal to that fair market value;

  • (b) the trust’s last taxation year that began before the particular time is deemed to have ended immediately before the particular time; and

  • (c) a taxation year of the trust is deemed to begin at the particular time.

• Marginal note:Annuity contract ceasing to be a TFSA

  (7) If an annuity contract ceases, at a particular time, to be a TFSA,

  • (a) the holder of the TFSA is deemed to have disposed of the contract immediately before the particular time for proceeds equal to its fair market value immediately before the particular time;

  • (b) the contract is deemed to be a separate annuity contract issued and effected at the particular time otherwise than pursuant to or as a TFSA; and

  • (c) each person who has an interest or, for civil law, a right in the separate annuity contract at the particular time is deemed to acquire the interest at the particular time at a cost equal to its fair market value at the particular time.

• Marginal note:Deposit ceasing to be a TFSA

  (8) If a deposit ceases, at a particular time, to be a TFSA,

  • (a) the holder of the TFSA is deemed to have disposed of the deposit immediately before the particular time for proceeds equal to its fair market value immediately before the particular time; and

  • (b) each person who has an interest or, for civil law, a right in the deposit at the particular time is deemed to acquire the interest at the particular time at a cost equal to its fair market value at the particular time.

• Marginal note:Arrangement is TFSA only

  (9) An arrangement that is a qualifying arrangement at the time it is entered into is deemed not to be a retirement savings plan, an education savings plan, a retirement income fund or a disability savings plan.