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) Will a pension payment under the Royal Canadian Mounted Police Superannuation Act ("RCMPSA") in respect of an injury, disability or death be exempt from tax? 2) Has the Agency changed its position in respect of the determination of the amount of pension that relates to the injury, disability or death?
Position: 1) The portion related to the disability is exempt. 2) No
Reasons: 1) The disability portion of pension under section 32 of the RCMPSA amount is not taxable under 81(1)(i) of the Act. 2) The Agency will accept the amount determined under the RCMPSA.
Royal Canadian Mounted Police
1200 Vanier Parkway
Ottawa ON K1A 0R2 2000-000896
M. P. Sarazin
Attention: Guy Fortin
March 14, 2000
Dear Sirs:
Re: Taxation of R.C.M.P. Disability Pension
This is in response to your letter dated January 25, 2000, wherein you requested our comments regarding the application of paragraph 81(1)(i) of the Income Tax Act (the "Act").
You have an officer who was medically discharged from the RCMP in XXXXXXXXXX under section 11(2)(b) of the Royal Canadian Mounted Police Superannuation Act ("RCMPSA"). Veterans Affairs Canada ("VAC") has ruled that the officer's medical condition was aggravated by her service in the RCMP in accordance with subsection 32(1) of the RCMPSA. In determining the officer's benefit entitlements under the Pension Act, VAC has determined that the officer's entitlement rate which is based on the RCMP's degree of responsibility for the medical condition is 2/5ths and the officer's assessment rate which is based on the degree of the officer's disability is 30%. The officer's benefit entitlement in respect of the disability is 12% (computed as the product of the entitlement rate and the assessment rate (2/5 x 30%)). Under the RCMPSA, a factor of 12% applied to the total pension results in the officer being entitled to a monthly disability pension of $177.68 (single pensioner), $222.10 (married pensioner) or $245.20 (married with one dependent child).
The XXXXXXXXXX Tax Services Office has advised the officer that 2/5ths of the total pension received under the RCMPSA would be tax-free pursuant to paragraph 81(1)(i) of the Act. In the past, the benefit entitlement (in this case the 12% factor determined under subsection 32(1) of the RCMPSA multiplied by the pension amount) constituted the portion of the pension exempted from tax under paragraph 81(1)(i) of the Act. You ask whether the Canada Customs and Revenue Agency (the "Agency") has changed its policy in respect of the computation of the disability pension that qualifies for the exemption under paragraph 81(1)(i) of the Act.
Paragraph 81(1)(i) of the Act clearly states that a pension payment received under section 32 of the RCMPSA in respect of an injury, disability or death is not taxable in the hands of the recipient. The Agency's general position regarding the application of paragraph 81(1)(i) of the Act is found in paragraph 14 of Interpretation Bulletin IT-397R (Amounts Excluded from Income - Statutory Exemptions and Certain Service or RCMP Pensions, Allowances and Compensation). Only the pension payments, allowances or other compensation received in respect of an injury, disability or death connected with the service in the RCMP under the provisions of the RCMPSA are not to be included in the recipient's income. We confirm that the Agency has not changed the position expressed in IT-397R.
In our view, only the pension received under section 32 of the RCMPSA would be eligible for the tax exemption under paragraph 81(1)(i) of the Act. The exempted amount would not be computed by taking the total pension received under the RCMPSA and multiplying this amount by either the entitlement rate established under the Pension Act or by the assessment rate. We will forward a copy of your letter and our response to the XXXXXXXXXX Tax Services Office.
We trust these comments will be of assistance.
Yours truly,
P. Spice
for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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