17 February 1997 External T.I. 9703095 - FOREIGN PENSION, TRANSFER TO RRSP

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

970309
XXXXXXXXXX M.P. Sarazin

Attention: XXXXXXXXXX

February 17, 1997

Dear Sir:

Re: Taxation of Hong Kong Retirement Payment

This is in reply to your letter dated January 28, 1997, wherein you acknowledge receipt of the information provided in our response letter dated January 22, 1997 (file #964223) and, even though there is no additional information available with respect to the makeup of the particular payments from Hong Kong, you request additional comments relating to the taxation of such amounts received by a resident of Canada where the amounts relate to employment services provided to a foreign employer by a non-resident person.

Comments

As we stated in our earlier letter, written confirmation of the tax implications inherent in particular proposed transactions are given by this Directorate only where the transactions are outlined in an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R3. Before requesting an advance income tax ruling, it is essential that you obtain sufficient information to determine the nature of the payments that will be received by the Canadian resident. We offer the following additional general comments which are not binding on the Department.

Whether payments from a foreign source are pension or superannuation payments, retiring allowances or some other kind of employment benefits for purposes of the Income Tax Act (the "Act") depends on all of the facts relating to the taxpayer's entitlements to the payments. The determination of which sections of the Income Tax Act (the "Act") would apply to include such foreign source payments in a Canadian resident's income can only be accomplished after a review of all of the facts.

If the payments are pension benefits received out of a foreign pension plan, a resident of Canada would be subject to income tax on all pension and superannuation benefits received in the year from the foreign pension plan. If an individual were rendering services while resident in another country and accrued pension benefits under a foreign pension plan in respect of those services, the foreign pension plan would be considered an "employee benefit plan" ("EBP") for purposes of the Act. Payments out of an EBP are included in income under paragraph 6(1)(g) of the Act. However, the portion of such payments attributable to services rendered when the recipient was not a resident of Canada is specifically excluded from inclusion in income under paragraph 6(1)(g) pursuant to subparagraph 6(1)(g)(iii) of the Act. The EBP payments relating to pension benefits received out of a foreign pension plan which are specifically excluded from inclusion in income as an EBP benefit under subparagraph 6(1)(g)(iii) of the Act would be included in the recipient's income under subparagraph 56(1)(a)(i) of the Act.

Amounts received from a foreign pension plan with respect to services rendered by the recipient in a period throughout which that recipient was not resident in Canada and included in the recipient's income under subparagraph 56(1)(a)(i) of the Act are eligible for a deduction under subparagraph 60(j)(i) of the Act in respect of the portion of such amounts that is transferred to a registered retirement savings plan. We also note that pension or superannuation benefits received by a taxpayer prior to the taxpayer becoming a resident of Canada would not be taxed in Canada.

We trust that the above comments and the comments provided in our earlier letter will be of assistance to you.

Yours truly,

for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch