9 February 2000 External T.I. 1999-0008505 - transfer of foreign pension plan 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:

1) Can the payment of a lump sum payment out of a foreign pension plan be rolled to an RRSP
2) The recipient received a salary continuance payment after becoming a resident of Canada, will this affect the amount he can roll to the RRSP

Position:

1) Question of fact, explained provisions in EBP, 56(1)(a)(i) and 60(j) rules
2) Yes it will affect the amount. The amount of pension payment for this period of time would be considered a payment from an EBP

Reasons:

1) Would depend on facts of situation and determination of what period of time the payment relates to. ie was the recipient a non-resident and a pension payment and whether the criteria in 60(j) are met.

2) Salary continuance is considered employment income and received while recipient was a resident of Canada

XXXXXXXXXX 								1999-000850
M. P. Baldwin
Attention: XXXXXXXXXX 

February 9, 2000

Dear Sirs:

Re: Transfer of funds from a foreign pension plan to an RRSP

This is in reply to your facsimile of November 23, 1999, wherein you request written confirmation of the tax implications of a transfer of funds from a foreign pension plan to a registered retirement savings plan (the "RRSP") in Canada.

It appears that the fact situation in your facsimile relates to a proposed transaction to be undertaken by a specific taxpayer and, therefore, we bring to your attention Information Circular 70-6R3 dated December 30, 1996, issued by the Canada Customs and Revenue Agency ("CCRA" - formerly Revenue Canada). Confirmation of tax consequences with respect to proposed transactions involving specific taxpayers will only be provided in response to a request for an advance income tax ruling. If you wish to obtain an advance income tax ruling with respect to a specific proposed transaction, a written request for an advance income tax ruling can be submitted in accordance with the Information Circular. Nevertheless, we can provide you the following general comments which are not binding on the CCRA.

An amount received from a foreign pension plan or superannuation plan 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 subparagraph 56(1)(a)(i) 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 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.

A deduction is available under subsection 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 (in the year or within 60 days after the end of the year) provided that :

a) the benefit payment is not exempt from Canadian tax by reason of subparagraph 110(1)(f)(i) of the Act,

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.

Note that employer contributions to a foreign pension plan in respect of a Canadian resident employee are considered to be made to a "retirement compensation arrangement" ("RCA") as provided in subsections 207.6(5) and (5.1) of the Act. However, subsection 207.6(5.1) of the Act specifically excludes a contribution made to a foreign plan in respect of an employee who has been resident in Canada for less than five of the preceding six years, provided the employee was a member of the foreign plan before becoming a Canadian resident.

With respect to salary continuation payments, where employment has been terminated and payments are paid by the former employer as a salary continuation for which regular employment benefits continue, the CCRA generally considers that the employment relationship has not been terminated and that the payments are actually regular salary or wages and taxable as such. This is so even where the employee is not required to report to work. In particular pension benefits can only accrue to persons who are employees and therefore, their presence indicates that there is an employment relationship.

With respect to the situation in your letter, it is our opinion that the salary continuation payment received by the individual while resident in Canada would be employment income and the payment of the pension amount for this period would be considered a payment out of an EBP as discussed above. Consequently, only the portion of the total payment that is received and included in income pursuant to subsection 56(1)(a)(i) of the Act and attributable for services rendered by the recipient or his spouse in a period throughout which that person was not resident in Canada, may be transferred to an RRSP pursuant to paragraph 60(j) of the Act.

We trust our comments will be of assistance to you.

Yours truly,

Patricia Spice
for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy & Legislation Branch