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 amounts held in a foreign pension arrangement be rolled into an RRSP after the member emigrates to Canada?
Position: Question of fact.
Reasons: We do not have sufficient information to determine whether the amount held in this U.K. arrangement is a pension, annuity or something else for purposes of the Act.
XXXXXXXXXX 2000-004187
M. P. Sarazin
November 3, 2000
Dear Sirs:
Re: Personal Pension Scheme ("PPS")
This is in response to your letter of July 25, 2000, requesting confirmation that you will be able to transfer amounts held in your PPSs to a tax deferred account in Canada after you emigrate to Canada
Confirmation of the tax consequences associated with completed transactions are provided by the relevant tax services office. Opinions concerning proposed transactions involving specific taxpayers will only be provided in response to a request for an advance income tax ruling. For more information concerning advance tax rulings, please refer to Information Circular 70-6R3 dated December 30, 1996, issued by the Canada Customs and Revenue Agency (the "Agency"). Copies of information circulars and interpretation bulletins are available from your local tax services office or on the Internet at the following site - http://www.ccra-adrc.gc.ca/formspubs/menu-e.html. However, we can provide you with the following general comments.
We have reviewed the information provided in your submissions on your PPSs in trying to determine whether withdrawals will be eligible to be transferred to a registered retirement savings plans ("RRSP") in Canada after you emigrate to Canada.
We have previously concluded that an amount received from a PPS 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. However, an amount received out of a PPS will only be included in the recipient's income under subparagraph 56(1)(a)(i) of the Act if it is a "superannuation or pension benefit" or is an amount received out of a "foreign retirement arrangement".
A "foreign retirement arrangement" is defined in subsection 248(1) of the Act as a plan or arrangement prescribed by section 6803 of the Income Tax Regulations. However, to date, only plans commonly known as "individual retirement accounts" or IRAs, that are described in subsections 408(a), (b) or (h) of the United States' Internal Revenue Code have been prescribed. Consequently, amounts received out of a PPS established in the United Kingdom are not considered amounts received from a foreign retirement arrangement.
Furthermore, amounts received out of a PPS scheme will not be considered subparagraph 56(1)(a)(i) "superannuation or pension benefits" except to the extent the PPS can be considered to be a superannuation or pension plan. In our opinion, this will only occur where contributions have been made to the plan by or on behalf of an employer or former employer of an employee in consideration for services rendered by the employee or in some cases, where amounts have been contributed by a government.
To explain, the courts have generally found that a plan will not be a superannuation or pension plan where only the beneficiary of the plan has made contributions. The courts have in particular, frequently cited the 4th definition of pension as set out in the Shorter Oxford English Dictionary as support for their decisions. This definition provides that a pension is:
"4. An annuity or other periodical payment made, esp. by a government, a company, or an employer of labour, in consideration of past services."
Because of these decisions we have accepted the general position that amounts received out of a PPS where only employee contributions have been made are not superannuation or pension benefits that are included in income in accordance with subparagraph 56(1)(a)(i) of the Act and cannot be transferred to an RRSP under the provisions of paragraph 60(j) of the Act.
We are not able to provide any comments on the treatment of amounts received out of the PPSs without additional information.
Article XVII of the Canada-U.K. Income Tax Convention deals with pension and annuity payments arising in one contracting state and paid to a resident of the other contracting state. "Pension" and "annuity" payments are generally subject to income tax in the country where the recipient resides although "annuity" payments may also be subject to a 10% tax in the country from which the payment is made. However, paragraph 3 of Article XVII provides that only periodic payments made out of superannuation, pension and retirement plans will be treated as "pension" for purposes of paragraph 1 of the provision and paragraph 4 of Article XVII provides that only fixed periodic payments under annuity contracts will be treated as "annuity" for purposes of paragraph 2 of the article. Paragraph 4 of Article XVII also provides that the term "annuity" does not include a pension or any payment made under a superannuation, pension or retirement plan in settlement of all future rights under such a plan. It should also be noted that for the purposes of these provisions we have not as yet determined if an amount paid under the terms of an annuity purchased with funds accumulated in a PPS would be considered to be amounts paid under a superannuation, pension or retirement scheme.
We trust that the above comments will be of assistance and, as requested, return the policy document herewith.
Yours truly,
Patricia Spice
for Director
Financial Industries Division
Income Tax Rulings Directorate
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