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 Issues: Can amounts paid out of a UK pension plan be transferred to an RRSP?
Position: Question of Fact.
Reasons: Where a UK pension plan is considered a pension plan under the Act, paragraph 60(j) could apply to permit a transfer to be made on a tax-free basis under Canadian tax law. Subject to Article XVII of Canada-UK treaty.
XXXXXXXXXX 2001-010469
Karen Power, CA
(613) 957-8953
February 27, 2002
Dear XXXXXXXXXX:
Re: Transfer of UK Pension Money to an RRSP
We are writing in reply to your facsimile of October 4, 2001, requesting our comments regarding the eligibility of an amount that was transferred from an NHS Pension Scheme ("NHSPS") administered in the United Kingdom to a Canadian registered retirement savings plan ("RRSP"). We apologize for the delay in responding to your enquiry.
Confirmation of the tax consequences associated with completed transactions is provided by the relevant tax services office. Consequently, we can only provide you with the following general comments.
The Canada Customs and Revenue Agency's ("CCRA") general views regarding the transfer of amounts from non-registered pension plans to an RRSP are found in Interpretation Bulletin IT-528 Transfers of Funds Between Registered Plans. Copies of this and other publications are available at the following internet site: http://www.ccra-adrc.gc.ca/tax/technical/incometax/menu-e.html. Paragraph 26 discusses the application of subparagraph 60(j)(i) of the Income Tax Act (the "Act") which allows a deduction for the transfer of a superannuation or pension benefit (that is not part of a series of periodic payments) from a non-registered pension plan for services provided by an individual in a period throughout which that individual was not resident in Canada. To be eligible for a deduction under subparagraph 60(j)(i) for the transfer of the superannuation or pension benefit to an individual's RRSP, the individual has to include such a benefit in income for the year under subparagraph 56(1)(a)(i) of the Act and the transfer has to be made for the year the amount is included in the individual's income or within 60 days after the end of the year.
An amount received out of a foreign plan will only fall within the provisions of subparagraph 56(1)(a)(i) of the Act if the foreign plan is a superannuation or pension plan. In our opinion, this will only occur where contributions have been made to the foreign 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.
We have reviewed the "Introduction to NHS Scheme" and "Guide to the Scheme" booklets published by the NHS Pension Agency and other information available on the internet at http://www.nhspa.gov.uk/scheme_booklets.cfm. Based solely on the information provided therein, it is our understanding that the NHSPS is a United Kingdom statutory occupational pension scheme. An occupational pension scheme is an arrangement in which an employer or group of employers provide pensions for their employees when they retire. Based on our review, we are of the opinion that the NHSPS arrangement would likely be described as a pension arrangement for purposes of the Act.
The full amount received, before withholding taxes, out of a foreign pension plan that qualifies as a superannuation or pension plan or arrangement for purposes of the Act is taxable under subparagraph 56(1)(a)(i) of the Act and should be reported on the taxpayer's T1 tax return at line 115. The amount should be reported in Canadian currency using the particular exchange rate in effect at the time the amount was received. Where the taxpayer is entitled to a deduction pursuant to subparagraph 60(j)(i), the deduction should be claimed on line 208 of the T1 return. The taxpayer should ensure that a completed Schedule 7, RRSP Unused Contributions, Transfers, and HBP or LLP Activities, is attached to their return.
The taxes withheld by the administrator of the NHSPS are considered to be non-business taxes paid to the United Kingdom. Consequently, an individual may be entitled to claim a foreign tax credit with respect to UK withholding taxes deducted from a transfer to an RRSP. The foreign tax credit is generally computed as the lesser of the foreign taxes paid and a proportion of the Canadian taxes paid. The proportion is the taxpayer's foreign income divided by the taxpayer's total adjusted income. We note that, in determining the proportion, the foreign income is not reduced by the amount of the deduction under paragraph 60(j) of the Act. Interpretation Bulletin
IT-270R2 Foreign Tax Credit will provide you with the CCRA's general views on the computation of the foreign tax credit.
In the event that an individual is not able to claim a foreign tax credit for the full amount of the withholding taxes, the individual may be allowed to claim a deduction under subsection 20(12) of the Act for an amount equal to the amount by which the withholding taxes exceed the foreign tax credit claimed. Interpretation Bulletin IT-506 Foreign Income Taxes as a Deduction From Income provides the CCRA's general views with respect to the deductibility of foreign income taxes.
We are unable to confirm whether any Canadian retirement investment vehicles would be equivalent to an NHSPS. This would require an interpretation of the laws of the United Kingdom, and it is outside this Directorate's mandate to provide opinions regarding foreign domestic laws.
We trust our comments will be of assistance to you. These comments are provided in accordance with the practice outlined in paragraph 22 of Information Circular 70-6R4.
Yours truly,
Mickey Sarazin, CA
for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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