19 January 2000 External T.I. 2000-0001595 - RETIRINg ALLOWANCE SERVICE OUTSIDE CANADA

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 the years of service provided outside of Canada be used in calculating the amount of a retiring allowance that may be transferred under 60(j.1) of the Act? Will a break in service have any effect? How many years of service can be counted and what amount may be transferred in the particular case?

Position:

This is a factual situation so a determinate statement cannot be provided. However general comments were provided to explain that service outside of Canada with the same employer can be counted and that a break in service will not have any effect on the calculation.

Reasons:.

Basic explanation of the law

XXXXXXXXXX 				2000-000159
W. C. Harding
January 19, 2000

Dear XXXXXXXXXX:

Re: Transfer of retiring Allowances to an RRSP

This is in reply to your facsimile of January 12, 2000, in which you requested confirmation that the amount of a retiring allowance that may be transferred to your RRSP is based on your employment with your employer both in Canada and in Trinidad and Tobago.

As we discussed during our telephone conversations of January 11 and 18, 2000 (XXXXXXXXXX/Harding), because your enquiry deals with an actual proposal to transfer a retiring allowance to an RRSP, we cannot provide written confirmation of the tax implications unless a request is made for an advance income tax ruling as set out in Information Circular 70-6R3. However, we can provide the following general comments.

The Income Tax Act (the Act) provides for the transfer of an employee's retiring allowance to the employee's RRSP within limits set out in the Act. In general terms, the Act provides that an employee may transfer an amount of up to $2,000 multiplied by the number of years before 1996 during which the employee was employed by the employer that is paying the retiring allowance or by a person related to that employer. The employee may also transfer an amount of $1,500 for each calendar year before 1989 during which the employee was not a member of a pension or deferred profit sharing plan to which the employer or a related person had made contributions. For a detailed explanation of these limits please refer to the current version of Interpretation Bulletin IT-337R -Retiring Allowances which is available from the Canada Customs and Revenue Agency (the "Agency") Internet web site at http://www.ccra-adrc.gc.ca/E/pub/tp/i337r3em/README.html.

The use of the terms "employer" and "person related to the employer" permit the employer, or the related person to be situated within or outside of Canada. The term "related employer" also includes wholly owned subsidiaries of an employer or persons who are affiliated with the employer as discussed in the above noted interpretation bulletin. Accordingly an employee may count years of service with an employer or a related employer where that service was provided inside or outside of Canada.

The provision also permits the inclusion of each calendar years where service is provided including years when the employee was only employed for part of the year. Furthermore, it permits the inclusion of years where there has been a break in service. This is explained in paragraph 13 of the above noted Interpretation Bulletin.

As an example, assume an employee was employed by a foreign branch of a Canadian employer for the years 1963 through 1979 and was then employed by the same employer in Canada from 1979 to 1999. If the employee was a member of the employer's pension plan in each year, the maximum amount of a retiring allowance that could be transferred to an RRSP would be $66,000 which is $2,000 for each of the 33 years of employment before 1996). If the employee was not a member of the employer's pension plan while employed outside of Canada, the maximum contribution would include an additional $24,000 being $1,500 for each of the 12 years 1963 through 1978.

As you requested we have forwarded a copy of this letter to your employer. We would also be pleased to discuss the matter with them should they require further clarification.

We trust this explanation of our position is satisfactory to you.

Yours truly,

P. Spice
for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch