TaxTips.ca
Canadian Tax and
Financial Information
Deferred Profit Sharing Plans

Ads keep this website free for you.
TaxTips.ca does not research or endorse any product or service appearing in ads on this site.  Before making a major financial decision you  should consult a qualified professional.

Looking for US tax information?
See
USTaxTips.net

Need an accounting, tax or financial advisor? Look in our Directory.      Stay Connected with TaxTips.ca!      Internet Explorer - Use compatibility view for calculators to work properly!

Home
What's New
Calculators
Personal Tax
Business
Sales Taxes
Free in 30!
Financial Planning
RRSP RRIF TFSA
Real Estate
Stocks Bonds etc.
Seniors
Disabilities
Canada
Alberta
British Columbia
Manitoba
Ontario
Quebec
Saskatchewan
Atlantic Provinces
Territories
Federal Budget
Provincial Budgets
Statistics etc.
Glossary
Site Map
Directory
Advertise With Us
Contact Us/About Us
Links & Resources



Financial Planning -> Pensions -> Deferred profit sharing plans (DPSPs)

Deferred Profit Sharing Plans (DPSPs)

Income Tax Act s. 147

Deferred Profit Sharing Plans are not regulated by pension legislation, but are registered under and  must comply with the Income Tax Act.

Characteristics of a DPSP:

bullet The contributions to the plan are made based on the profits of the company.
bullet This plan may be set up for some or all of the employees.
bullet Employees cannot contribute to the plan, other than a direct transfer from another DPSP, after 1990.
bullet Contributions are not taxable to the employee.
bullet Income in the plan is not taxable.
bullet Pension adjustment (PA) from DPSP reduces the amount that the employee can contribute to an RRSP.
bullet The employee is taxed when withdrawals are made from the plan.
bullet A DPSP may provide that, on election by the beneficiary, all or any part of the amounts payable to the beneficiary may be paid:
bullets. 147(2)(k)(v) in equal instalments payable not less frequently than annually over a period not exceeding 10 years from the day on which the amount became payable, or
bullets. 147(2)(k)(vi) to a licensed annuities provider to purchase an annuity for the beneficiary, where:
bullet(A) annuity payments begin no later than the end of the year in which the beneficiary attains 71 years of age, and
bullet(B) the guaranteed term, if any, of the annuity does not exceed 15 years.
bullet DPSP lump sum payments can be transferred tax-free to an RPP, RRSP, or RRIF.

See also the Canada Revenue Agency (CRA) information circular IC77-1R5 Deferred Profit Sharing Plans.

For information on different types of profit-sharing plans, see the comparison chart on the Human Resources and Social Development Canada (HRSDC) website.

Revised: September 20, 2017

 

Copyright © 2002 - 2017 Boat Harbour Investments Ltd. All Rights Reserved  See Reproduction of information from TaxTips.ca

Facebook  | Twitter  |  Google + |  Monthly Newsletter Sign-up  What’s New E-mail Notification RSS News Feed
The information on this site is not intended to be a substitute for professional advice.  Each person's situation differs, and a professional advisor can assist you in using the information on this web site to your best advantage. 
Please see our legal disclaimer regarding the use of information on our site, and our Privacy Policy regarding information that may be collected from visitors to our site.