CRA publishes new mechanism for refund of remitted RCA refundable tax
January 08, 2025
The retirement compensation arrangement (RCA) rules under the Income Tax Act (Canada) were amended to exempt letter of credit and surety bond fees from attracting RCA refundable tax effective March 28, 2023, and to allow employers to request a refund of previously remitted RCA refundable tax in respect of fees that were paid for the purposes of securing certain pension benefits. See our sidebar for further details.
CRA has now released instructions for employers to claim a refund of the previously remitted RCA refundable taxes. For 2024 and subsequent taxation years, employers must complete a new section on the T3 RCA tax return (Step 3 – Specified refundable tax) to trigger the refund process. Employers may request a refund equal to 50% of the supplemental pension benefits paid directly by the employer in the relevant taxation year to beneficiaries whose benefits were secured by a letter of credit or surety bond, up to the amount of refundable tax remitted before March 28, 2023. The new T3 RCA tax return includes the option to request that the refund be issued directly to the employer.
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