31 July 1998 External T.I. 9808715 - TRANSFER A PENSION PLAN FROM UK 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: Is a rollover available for a lump sum transfer from a UK pension plan to an RRSP of a Canadian resident.

Position: Question of fact.

Reasons: Subject to Article XVII of UK treaty and paragraph 56(1)(a).

XXXXXXXXXX 5-980871
Fouad Daaboul

July 31, 1998

Dear Sir:

Re: Transfer of funds from a pension plan in the UK to an RRSP in Canada

This is in reply to your letter of March 27, 1998, wherein you requested written confirmation on the tax implications on the transfer of funds from a pension plan in United Kingdom ("UKPP") to a registered retirement savings plan (the "RRSP") in Canada and the necessary information for your UKPP administrator to execute such a transfer.

Your question relates to a proposed payment and a technical interpretation concerning the tax consequences can only be provided in the context of an advance income tax ruling. We may provide, however, the following general comments which are not binding on the Department.

An amount received from a UKPP may be transferred to an RRSP and deducted in computing income for a year in accordance with the provisions of paragraph 60(j) of the Income Tax Act (the "Act") when the amount received is included in the recipient's income for the year under the provisions of paragraph 56(1)(a) of the Act.

A foreign superannuation fund or plan is generally considered to be an employee benefit plan ("EBP") for Canadian income tax purposes. By virtue of subparagraph 6(1)(g)(iii) of the Act, an amount received out of an EBP is taxable under subparagraph 56(1)(a)(i) of the Act where the amount is attributable to services rendered while the recipient was not resident in Canada and is a superannuation or pension benefit. 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 (the "Plan") and any payment made to a beneficiary under the Plan in accordance with the terms of the Plan or, resulting from the amendment or the termination of the Plan.

A deduction is available under paragraph 60(j) of the Act for the portion of a superannuation or pension benefit received out of a foreign pension plan that is contributed to an RRSP provided that:

a) the benefit payment is not exempt from Canadian tax by reason of subparagraph 110(1)(f)(i) of the Act (under the Canada - U.K. Income Tax Convention (1978), a pension payment, which includes a payment out of a superannuation or pension plan according to Article XVII(3), arising in the U.K. and paid to a Canadian resident is taxable in Canada pursuant to Article XVII(1)),

b) the benefit is not part of a series of periodic payments,

c) the benefit is attributable to services rendered by the recipient or his spouse in a period throughout which such person was not resident in Canada, and

d) as is designated by the taxpayer in the taxpayer's return of income under Part I of the Act for the year.

No form is required to be filled out by yourself or by the administrator of the UKPP.

In summary, subject to the specific comments above, a lump-sum pension payment received by an individual resident in Canada which relates to employment while the recipient was not a resident of Canada may be transferred to an RRSP. The amount received by the individual is to be included in income and the amount contributed to the RRSP is claimed as a deduction for income tax purposes.

We trust our comments will be of assistance to you.

Yours truly,

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