8 May 2001 External T.I. 2000-0057405 - Exempt RPP Payments

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: Are RPP payments made to taxpayer exempt from tax under paragraph 212(1)(h) of the Act?

Position: yes

Reasons: In the t/p's particular situation, the t/p was a non-resident of Canada throughout period t/p was employed at Canadian Consulate in XXXXXXXXXX in respect of RPP benefits. Since the t/p satisfied both of the conditions in subparagraph 212(1)(h)(v) and (vi), the RPP payments are exempt from tax under paragraph 212(1)(h) of the Act.

2000-005740
XXXXXXXXXX G. Middleton
(613) 957-2122
May 8, 2001

Dear XXXXXXXXXX:

This is in reply to your letter of November 13th and further to our recent telephone conversation of May 1st regarding your request for a refund of the tax withheld on your pension payments that relate to your employment services with the Canadian consulate in XXXXXXXXXX.

As discussed with you, if our understanding of the facts in your particular situation is correct, such pension payments are exempt from tax under paragraph 212(1)(h) of the Income Tax Act (the “Act”) by virtue of the exemption in subparagraphs 212(1)(h)(v) and (vi) of the Act. In order to obtain a refund of the tax withheld on these pension payments for the year 2000, we are enclosing a partially completed NR7-R form entitled “Application for Refund of Non-Resident Tax Withheld”. Please complete the NR7-R form in the appropriate areas and sign it. You may have received a NR4 slip entitled “Statement of Amounts Paid or Credited to Non-Residents of Canada” from the XXXXXXXXXX which summarizes the total amount of the pension payments you received in the year 2000 and the amount of non-resident tax withheld on the pension payments; if so, please attach this slip to the NR7-R refund request. Then send the completed NR7-R refund request to:

International Tax Services Office
Attention: Marie Miron
2204 Walkley Road
Ottawa, Ontario, K1A 1A8
CANADA
Telephone Number (613) 526-6524

We will be writing a memorandum to Marie Miron of the International Tax Services Office to explain the facts in your particular situation and the reasons why the pension payments should be exempt from non-resident tax under Part XIII of the Act.

Other

With respect to the pension payments that you receive that relate to services performed in Quebec and the non-resident tax withheld from these pension payments, we offer the following comments:

(a) In general, an election under section 217 of the Act is only beneficial to persons with low income. If you make an election under section 217 of the Act for the year 2000, you may, or may not, be entitled to a refund, or partial refund, of the tax withheld on the pension payments you received in the year 2000. However, if you decide to make an election under section 217 of the Act, a section 217 income tax return must be completed and filed on or before June 30, 2001. We are enclosing the pamphlet entitled “Electing Under Section 217 of the Income Tax Act” plus the guide entitled “Genera Income Tax and Benefit Guide for Non-Residents and Deemed Residents of Canada 2000”. There are instructions on pages 49 and 50 of the Non-Resident Guide for electing under section 217 and completing a section 217 income tax return.

(b) With respect to the pension payments you will receive in the future, you may apply for a reduction of the non-resident tax to be withheld from such payments on an annual basis. In case you decide to apply for such a reduction of non-resident tax, we have enclosed an NR5 form entitled “Application by a Non-Resident of Canada for a Reduction in the Amount of Non-Resident Tax Required to be Withheld”.

(c) You may be entitled to claim a foreign tax credit in computing your income taxes payable to the USA on your U.S. income tax return in respect of the Canadian taxes that are payable on the pensions. As we discussed, such a foreign tax credit is a reduction in your U.S. income taxes payable amount and you should claim this tax reduction if you are entitled to do so.

If you should need any further assistance or if you have any further questions on filing or completing the above mentioned application forms or returns, please do not hesitate to call Marie Miron at (613) 526-6524.

Yours truly,

for Director
International and Trusts Division
Income Tax Rulings Directorate
Policy and Legislation Branch

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