Income Tax Severed Letters - 2015-10-14

Ruling

2015 Ruling 2015-0572541R3 - Foreign Tax Credit on Transfer of 401(k) to RRSP

CRA Tags
Canada-US Convention, US Internal Revenue Code, 56(1)(a)(i), 146(5), 126(1), 60(j)
Summary Under
Tax Topics - Income Tax Act - Section 126 - Subsection 126(1)
s. 60(j) deduction does not reduce foreign source income for FTC purposes
Summary Under
Tax Topics - Income Tax Act - Section 126 - Subsection 126(7) - Non-Business-Income Tax
additional 10% tax on withdrawal from 401(k) plan, as income tax
Summary Under
Tax Topics - Income Tax Act - Section 60 - Paragraph 60(j)

Principal Issues: 1) Can the taxpayer transfer an amount currently held in a 401(k) plan to an RRSP under paragraph 60(j) of the Act? 2) Can the taxpayer claim the US withholding taxes under subsection 126(1)? 3) Is the 10% additional US tax payable on the early withdrawal from a 401(k) plan considered a non-business-income tax as defined by subsection 126(7) of the Act?

Position: 1) Yes. 2) Yes 3) Yes

Reasons: 1) The payment meets the conditions of paragraph 60(j). 2) The amount withheld under Section 1441 of the Code is an income or profits tax. 3) The 10% additional US tax imposed under Section 72 of the Code is an income or profits tax.

Technical Interpretation - External

24 September 2015 External T.I. 2013-0495611E5 - Withholding on incentive payments to non-residents

CRA Tags
212(1)(d), ITR 101, ITR 100, ITR 103, ITR 102, ITR 105, ITR 104, 153(1)
Summary Under
Tax Topics - Income Tax Act - Section 212 - Subsection 212(1) - Paragraph 212(1)(d) - Subparagraph 212(1)(d)(iii)
no withholding on payments based on sales warranties sold by dealers
Summary Under
Tax Topics - Income Tax Regulations - Regulation 100 - Subsection 100(1) - Remuneration
no withholding on payment to non-resident employee of 3rd party
Summary Under
Tax Topics - Income Tax Regulations - Regulation 200 - Subsection 200(1)
T4A reporting of payments to non-resident employee of 3rd party

Principal Issues: Whether incentive payments made by Canco to non-resident individuals are subject to withholding or reporting.

Position: Likely not subject to withholding in this hypothetical fact pattern, but should be reported on T4A.

Reasons: Legislation.

Technical Interpretation - Internal

15 September 2015 Internal T.I. 2015-0572771I7 - T1135 - Normal Reassessment Period

CRA Tags
233.3(3), 152(4), 162(7), 152(3.1), 216(1)
Summary Under
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4)
unlike s. 216 returns, the assessment of s. 162(7) penalties is subject to the same normal reassessment period as for the Part I return
Summary Under
Tax Topics - Income Tax Act - Section 162 - Subsection 162(7)
unlike s. 216 returns, the assessment of s. 162(7) penalties is subject to the same normal reassessment period as for the Part I return

Principal Issues: Whether the normal reassessment period for a T1135 return, required to be filed according to subsection 233.3(3), begins at the same date as the return of income under Part I.

Position: Yes.

Reasons: Penalties assessed for the failure to file a T1135 are assessed under Part I and are subject to the normal reassessment period and other limitations in section 152.