11 April 2002 External T.I. 2001-0102445 - TAX TREATMENT OF UNJSPF PENSION

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 CCRA.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.

PRINCIPAL ISSUE:

Tax implication of withdrawing pension from UNJSPF and to invest the amount in an RRSP?

PositionS:

The amount withdraw will be taxable pursuant to subparagraph 56(1)(a)(i) of the Act. If the plan is an RPP, it will be possible to transfer the lump sum to an RRSP.

Reasons:

1. It is a "superannuation or pension benefit" as defined in subsection 248(1) of the Act. Furthermore, section 18 of Article V of the Convention on the Privileges and Immunities of the United Nations ("Convention") provides exemption from tax to those United Nations officials on the salaries and emoluments paid to them by the United Nations. We are not aware of any provision in the Convention that would exempt from Canadian tax pensions received from the United Nations. However, part of the pension payments might be exempt pursuant to subparagraph 110(1)(f)(i) of the Act.

2. E55161. UNJSPF is a RPP pursuant to the Act.

XXXXXXXXXX 							2001-010244
L. J. Roy, CGA
April 11, 2002

Dear XXXXXXXXXX:

Re: Pension from United Nations Joint Staff Pension Fund (UNJSPF)

This is in reply to your letter of May 4, 2001, which was addressed to the International Tax Services Office and forwarded to us on September 20, 2001, requesting our views regarding the taxation under the Income Tax Act (the "Act") of amounts that you would received from the UNJSPF and invest in a Registered Retirement Pension Plan ("RRSP"). We apologize for the delay in responding to your letter.

It appears that the opinions you seek relate to specific proposed transactions and, therefore, we bring to your attention Information Circular 70-6R4 dated January 29, 2001, issued by the Canada Customs and Revenue Agency (the "Agency"). Copies of Interpretation Bulletins and Information Circulars are available on the Internet at the following site - http://www.ccra-adrc.gc.ca/formspubs/menu-e.html. Confirmation of tax consequences with respect to proposed transactions involving specific taxpayers will only be provided in response to a request for an advance income tax ruling. However, we can provide you with the following general comments.

It is our understanding that the UNJSPF is a registered pension plan ("RPP") for the purposes of the Act. Consequently, our comments will be based on that fact and are not applicable if the plan is not an RPP. In this regard, you may wish to contact the administrators of the UNJSPF to confirm the status of the plan before you withdraw your pension benefits.

Canadian residents are generally required to include in their income all amounts received from an RPP as a "superannuation or pension benefit" pursuant to subparagraph 56(1)(a)(i) of the Act regardless of whether those payments arise inside or outside Canada.

There are certain tax exemptions in Canada available to employees of certain international organizations. However, these exemptions are generally restricted to remuneration from employment and do not extend to pension income.

The Agency would recognize any tax exemptions granted to the employees and officials of the UNICEF pursuant to the Convention on the Privileges and Immunities of the United Nations ("Convention"). However, section 18 of Article V of the Convention only provides exemption from tax to those United Nations officials on the salaries and emoluments paid to them by the United Nations. We are not aware of any provision in the Convention that would exempt from Canadian tax pensions received from the United Nations.

It is our understanding that the UNJSPF is an entity constituted within the United Nations, the administration and control of which are the responsibility of the Secretary-General of that organization. Since the United Nations headquarters are located in the United States, the application of the Canada-U.S. Income Tax Convention (the "treaty") must be considered. Pursuant to paragraph 1 of Article XVIII of the treaty, Canada maintains its right to tax pension income arising in the U.S. and paid to a resident of Canada to the extent such income would have been subject to tax in the U.S. had the recipient been a resident of the U.S.

In this regard, it is our understanding the United States would not tax its residents on the portion of a pension payment that is a refund of the participant's own contributions. Accordingly, the portion of the taxpayer's pension paid by the UNJSPF, whether that pension receipt is a lump sum payment or periodic pension payment, that is a refund of contributions may be deductible in computing the taxpayer's taxable income in Canada pursuant to subparagraph 110(1)(f)(i) of the Act as treaty-exempt income.

In order to have the deduction pursuant to subparagraph 110(1)(f)(i) of the Act, you should obtain a letter from the U.S. tax authorities confirming that they do not tax its resident on a portion of the pension from UNJSPF and that such an amount should be exempt from Canadian tax in accordance with paragraph 1 of Article XVIII of the treaty.

Regarding the possibility to invest the amount received from the UNJSPF in an RRSP, section 147.3 of the Act permits the transfer of an amount received from an RPP to a Registered Retirement Savings Plans. In that respect, Interpretation Bulletin IT-528, entitled "Transfers of Funds Between Registered Plans", which is available at your local tax services office or on the internet at www.ccra-adrc.gc.ca/formspubs/menu-e.html) provides the Agency's views concerning such transfers.

However, it should be noted that pursuant to subsection 147.3(9) of the Act, a deduction pursuant to subparagraph 110(1)(f)(i) of the Act would not be available for an amount that is transferred in accordance with any of subsections (1) to (8).

The foregoing opinions are not rulings and in accordance with the guidelines set out in

IC 70-6R4 they are not binding on us.

We trust the above comments will be of assistance to you.

Manager
Financing and Plans Section
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislative Branch

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