CRA indicates that income distributions from RDSPs and TFSAs are “other income” under the Canada-US Convention, but that RRSP/ RRIF payments are “pensions” under Art. XVIII

CRA indicating that the reduced rate of 15% under Art. XXII:2 of the Canada-U.S. Convention may be applied to amounts distributed to U.S. residents from TFSAs, RDSPs and RESPs that were constituted as trusts (where such payments would have been income if the recipient had been resident) since such payments were not dealt with in any other Article of the Convention, and thus qualified as "other income."

In contrast, CRA indicated that Art. XXII:2 was not relevant to amounts paid out of RRSPs and RRIFs given that such amounts, including lump sum payments, constituted “pensions” as defined in Art. XVIII, i.e., they were payments "under a superannuation, pension or other retirement arrangement" and, thus, were not “other income” under Art. XXII. However, for such “pensions” to be eligible for the reduced withholding under Art. XVIII:2 of 15%, they also were required to qualify as "periodic pension payments" which, by virtue of the definition of that term in s. 5 of the Income Tax Conventions Interpretation Act, excluded inter alia a payment made from an RRSP before its maturity.

Neal Armstrong. Summaries of 3 November 2023 APFF Financial Strategies Roundtable, Q.9 under Treaties – Income Tax Conventions, Art. 18, Art. 22.