19 March 2001 External T.I. 2001-0066705 - transfer foreign pension 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.

Principal Issues:

Can an amount paid out of a particular retirement or pension arrangement be transferred to an RRSP?

Position:

No firm answer can be provided.

Reasons:

The request indicates that the employer did not make any contributions under the arrangement. If this is correct it would not be a pension plan. The plan is also not a Foreign Retirement Arrangement. Accordingly, there is no provision under the Act that will allow a deduction and thereby permit a tax deferred transfer of an amount from the arrangement to an RRSP.

XXXXXXXXXX 			2001-006670
W. C. Harding
March 19, 2001

Dear XXXXXXXXXX:

Re: Transfer of funds to a Registered Retirement Savings Plan (an "RRSP")

This is in reply to your letter of January 15, 2001, in which you asked if funds held in a particular foreign retirement savings plan could be transferred to an RRSP on your possible return to Canada.

Opinions concerning proposed transactions involving specific taxpayers may only be provided in response to a request for an advance income tax ruling. For more information concerning advance tax rulings, please refer to Information Circular 70-6R4 Advance Income Tax Rulings, issued by the Canada Customs and Revenue Agency (the "Agency"). Copies of information circulars and interpretation bulletins may be obtained on the Internet at http://www.ccra-adrc.gc.ca/menu/EmenuKKB.html. If there is a proposed immigration by a participant in a plan, we may be able to provide an advance income tax ruling where the plan documents are provided and the relevant facts surrounding the participant's employment as they relate to the plan are clearly described in a request for an advance income tax ruling. Consequently, we can only provide you with the following general comments.

For purposes of the Act, the term "superannuation or pension benefit" is defined under subsection 248(1) of the Act to include any amount received out of or under a superannuation or pension fund or plan and any payment made to a beneficiary under such a plan or fund in accordance with the terms of, or resulting from the amendment or termination of, the plan or fund. The determination of whether a particular plan would constitute a superannuation or pension fund for purposes of the Act is a question of fact. Generally, a plan will be considered a superannuation or pension fund where contributions have been made to the plan by or on behalf of an employer or former employer of an employee in consideration for services rendered by the employee and the contributions are used to provide an annuity or other periodical payment on or after the employee's retirement in consideration for his or her employment services. In some cases, a plan may be considered a superannuation or pension fund where amounts have been contributed by a government. If it is determined that the plan is a superannuation or pension fund for purposes of the Act, amounts received by a Canadian resident out of the plan subsequent to their becoming a resident of Canada would be included in the recipient's income under subparagraph 56(1)(a)(i) of the Act.

We note that the courts have generally found that a plan will not be a superannuation or pension plan where only the beneficiary of the plan has made contributions. The courts have in particular, frequently cited the 4th definition of pension as set out in the Shorter Oxford English Dictionary as support for their decisions. This definition provides that a pension is:

"4. An annuity or other periodical payment made, esp. by a government, a company, or an employer of labour, in consideration of past services."

In light of these decisions, we have accepted the general position that amounts received out of a foreign plan, are not superannuation or pension benefits where only employee contributions have been made.

The Agency's general views regarding the transfer of amounts from non-registered pension plans to an RRSP are found in Interpretation Bulletin IT-528 Transfers of Funds Between Registered Plans. Paragraph 26 of IT-528 provides as follows:

"Subparagraph 60(j)(i) of the Income Tax Act (the "Act") allows a deduction for a transfer of a superannuation or pension benefit (that is not part of a series of periodic payments) from a non-registered pension plan in a year for services rendered by an individual, or the individual's spouse or former spouse, in a period throughout which that individual, or the individual's spouse or former spouse was not resident in Canada. However, if any part of the superannuation or pension benefit is deducted under subparagraph 110(1)(f)(i) of the Act because it is exempt from tax under a tax convention or agreement with another country, that part cannot be deducted under paragraph 60(j) as a transfer to the individual's RPP or RRSP. To be eligible for a deduction under paragraph 60(j) for the transfer of the superannuation or pension benefit to the individual's RPP or RRSP, the individual has to include such a benefit in income for the year under subparagraph 56(1)(a)(i) of the Act and the transfer has to be made for the year the amount is included in the individual's income or within 60 days after the end of the year."

The above discusses the potential application of the Act where amounts are transferred from a foreign arrangement to an RRSP. Certain provisions of the Act (in particular, section 94.1 of the Act) could also apply if the funds are left within the foreign arrangement after a person becomes a resident of Canada. However, it is a question of fact whether these provisions will apply and we can only provide comments where the terms of the plan and the facts relating to the continued participation in the plan are made available.

We trust that our comments will be of assistance.

Yours truly,

Roberta Albert, CA
for Director
Financial Industries Division
Income Tax Rulings Directorate