8 May 2001 Internal T.I. 2000-0057407 - 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.

			May 8, 2001

	Non-Resident Withholding Accounts Division	International Section
	Fourth Floor, 2204 Walkley Road 	G. Middleton
	Ottawa ON  K1A 1A8	957-2122

	Attention: Marie Miron
			2000-005740

Part XIII Tax Refund Request for XXXXXXXXXX

As discussed in our recent telephone conversation, we are forwarding XXXXXXXXXX request for a refund of Part XIII tax on the pension payments described below as this is your area of responsibility.

Our understanding of the facts is as follows:

1. The t/p had been a non-resident person for purposes of the Act throughout the years since XXXXXXXXXX to now XXXXXXXXXX.

2. Therefore, the t/p was a non-resident person throughout her period of employment as "locally engaged staff" (LES) from XXXXXXXXXX at the Canadian Consulate in XXXXXXXXXX (the Consulate). As a result of this, the t/p's employment income at the Consulate was subject to tax under Part I of the Act in accordance with section 115 of the Act, in particular, paragraph 115(2)(c) of the Act.

3. The t/p is now receiving pension payments from a Canadian registered pension plan (the RPP) in respect of her employment at the Consulate during the years XXXXXXXXXX .

4. The details of the RPP is as follows:

XXXXXXXXXX.

5. Part XIII tax is being withheld on the RPP payments made to the t/p at the rate of 15%, presumably, in accordance with paragraph 2 of Article XVIII of the Canada-U.S. Income Tax Convention (the Convention).

Our Views

Since our understanding of the facts above indicate that the t/p has satisfied both of the conditions set out in subparagraphs 212(1)(h)(v) and (vi) of the Act, it is our opinion that the RPP payments made to the t/p fall under the exception in paragraph 212(1)(h) of the Act and are, therefore, not subject to Part XIII tax.

With respect to the condition in subparagraph 212(1)(h)(vi) of the Act, it is our view that employment services performed at the Consulate do not constitute employment in Canada. Furthermore, although paragraph 115(2)(d) of the Act deems a non-resident person such as the t/p to be employed in Canada, such deeming provision only applies for the purposes of subsection 2(3) of the Act; it does not apply for the purpose of subparagraph 212(1)(h)(vi) of the Act.

We are enclosing a copy of the letter that we recently wrote to the t/p explaining how to apply for a refund of Part XIII tax on Form NR7-R in respect of the RPP pension payments and a reduction of Part XIII tax on Form NR5 in respect of her other pension payments. We hope that our comments will assist you in dealing with the t/p's applications.

We are also enclosing a copy of the t/p's letter of November 13, 2000 for information purposes only. The t/p's application for residency status is not relevant except for information purposes; however, it clearly indicates that the t/p was a non-resident of Canada since XXXXXXXXXX.

For your information a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Legislation Access Database (LAD) on the CCRA's mainframe computer. A severed copy will also be distributed to the commercial tax publishers for inclusion in their database. The severing process will remove all material that is not subject to disclosure including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, they can be provided with the LAD version or they may request a copy severed using the Privacy Act criteria which does not remove client identity. Request for this latter version should be made by you to Jackie Page at (819) 994-2898. The severed copy will be sent to you for delivery to the client.

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

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