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.
Principal Issues: In respect of a member of the Canadian Forces that is medically released, is the Department of Veterans Affairs pension tax exempt and the RPP payments taxable in respect of the medical release?
Position: Yes.
Reasons: The Veterans Affairs pension is specifically exempted under paragraph 81(1)(d) and the RPP pension payments are specifically included under subparagraph 56(1)(a)(i) of the Act.
Department of Avionics
WSML/LCMM Instrumental/Electrical Integration
335 Tulip Crescent 2000-005385
Orléans ON K1E 2A9 M.P. Sarazin
Attention: Garey Gabriel
November 22, 2000
Dear Sirs:
Re: Taxation of Medical Release Pensions
This is in reply to your facsimile of November 1, 2000, requesting an explanation as to why a member of the Armed Forces that has been medically released has to pay tax on his or her pension benefits received out of a registered pension plan but the member does not have to pay any taxes on medical pension payments received from the Department of Veterans Affairs. You are of the view that, since both pensions result from the medical release, they should be treated consistently for purposes of the Income Tax Act (the "Act") and both pensions should be exempt from income taxes.
The Canada Customs and Revenue Agency's general views regarding pensions, allowances or other compensation received as compensation for the death or injury of a member of the Canadian Forces or the RCMP are expressed in the enclosed Interpretation Bulletin IT-397R titled "Amounts excluded from income - Statutory exemptions and certain service or RCMP pensions, allowances and compensation".
You will note that paragraph 10 of IT-397R describes the specific pensions that are exempt from taxes under paragraph 81(1)(d) of the Act. It would appear that the pension paid by the Department of Veterans Affairs to a former member of the Canadian Forces that has been medically released is tax exempt under paragraph 81(1)(d) of the Act. Since you have not provided any information regarding the pension paid by the Department of Veterans Affairs, you may want to confirm this with them.
A member of a registered pension plan has to include any payments received from the registered pension plan in his or her income under subparagraph 56(1)(a)(i) of the Act. The Act does not provide an exemption for amounts paid out of a registered pension plan in respect of an injury sustained in the course of the member's employment. Consequently, registered pension plan payments made to a member of the Canadian Forces that is medically released will be subject to income tax. This is reflected in paragraph 11 of IT-397R.
We trust that our comments will be of assistance.
Yours truly,
Roberta Albert, CA
for Director
Financial Industries Division
Income Tax Rulings Directorate
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