If a contributor makes significant contributions to a spousal RRSP, who is primarily taxed on the withdrawals?

In the context of a spousal Registered Retirement Savings Plan (RRSP), the primary principle is that the annuitant, who is the spouse receiving the contributions, is primarily taxed on any withdrawals made from that spousal RRSP. This is because while the contributor makes the contributions, the annuitant is considered the owner of the account for tax purposes when it comes to withdrawals.

The intent of a spousal RRSP is to allow higher-income partners to contribute to a plan in the name of their lower-income spouse, thereby shifting some of the tax burden when the funds are ultimately withdrawn. When the annuitant withdraws funds from the spousal RRSP, the amount is included in their taxable income, reflecting their individual tax liability.

This structure is beneficial for tax planning, particularly when there is a significant income disparity between partners, as it can potentially lower the overall tax burden of the couple when the money is withdrawn during retirement years. The focus on the annuitant being taxed is central to understanding the tax implications of spousal RRSPs.