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:
Will non-resident members of a registered pension plan providing services, in Canada, to their foreign employer, be considered "only occasionally employed in Canada" for purposes of subparagraphs 212(1)(h)(v) and (vi) of the Act.
Position: Question of fact.
Reasons:
Applying the decision of the courts in the Louis V. Nanne v. The Queen 2000 DTC 1653 (TCC) case, an examination of the number of days the non-resident was employed in Canada, in relation to the total number of days employed with the employer in the year must be made to determine whether a person is "only occasionally employed in Canada", for purposes of subparagraphs 212(1)(h)(v) and (vi) of the Act.
XXXXXXXXXX 2001-011446
XXXXXXXXXX, 2003
Dear XXXXXXXXXX:
Re: Advance Income Tax Ruling
XXXXXXXXXX
(the "Trustees") and the XXXXXXXXXX (the "Association")
This letter is in reply to your letter dated XXXXXXXXXX wherein you requested an advance tax ruling on behalf of the above-referenced Trustees and Association. We also acknowledge receipt of your letters dated XXXXXXXXXX and the information provided in various telephone conversations (XXXXXXXXXX).
Unless otherwise stated, all references to a statute are to the Income Tax Act R.S.C. 1985 (5th Supp.), c.1, as amended, (the "Act") and all terms and conditions used herein that are defined in the Act have the meaning given in such definition unless otherwise indicated.
We understand that, to the best of your knowledge and that of the Trustees and the Association, none of the issues involved in the ruling request is:
(i) in an earlier return of the Trustees, the Association or a related person,
(ii) being considered by a tax services office or tax centre in connection with a previously filed tax return of the Trustees, the Association or a related person,
(iii) under objection by the Trustees, the Association or a related person,
(iv) before the courts, nor
(v) the subject of a ruling previously issued by the Directorate.
Our understanding of the facts, proposed transactions and purpose of the proposed transactions is as follows:
Facts
The XXXXXXXXXX Pension Plan
1. The XXXXXXXXXX Pension Plan (the "XXXXXXXXXX Plan") is registered under the Act and in XXXXXXXXXX.
2. The XXXXXXXXXX Plan is a multi-employer defined contribution plan. XXXXXXXXXX.
3. XXXXXXXXXX.
The mailing address of the Trustees is:
XXXXXXXXXX.
The mailing address of the Association is:
XXXXXXXXXX.
4. The tax account number of the Trustees is XXXXXXXXXX. The Trustees' tax returns are filed at the XXXXXXXXXX. The tax account number of the Association is XXXXXXXXXX. The Association's tax returns are filed at XXXXXXXXXX.
5. XXXXXXXXXX.
6. XXXXXXXXXX.
7. Effective XXXXXXXXXX, the only active participants in the XXXXXXXXXX Plan with respect to whom any contributions are made after XXXXXXXXXX are XXXXXXXXXX. However, XXXXXXXXXX continue to be entitled to benefits under the XXXXXXXXXX Plan in respect of contributions made on their behalf to the XXXXXXXXXX Plan prior to XXXXXXXXXX.
8. Benefits for service prior to XXXXXXXXXX for XXXXXXXXXX are provided through deferred annuity contracts purchased from XXXXXXXXXX. Different levels of benefits based on defined contribution formulas were provided for XXXXXXXXXX.
9. Assets equal to contributions made in respect of XXXXXXXXXX under the XXXXXXXXXX Plan for the period XXXXXXXXXX and investment earnings thereon continue to be held under the XXXXXXXXXX Plan. As at XXXXXXXXXX, the total of all assets relating to benefits accrued by XXXXXXXXXX under the XXXXXXXXXX Plan for the period XXXXXXXXXX was $XXXXXXXXXX. Those assets are held in XXXXXXXXXX Accounts and are invested and accounted for separately from assets held in XXXXXXXXXX Accounts.
10. In addition, the following assets are currently held under the XXXXXXXXXX Plan: (i) assets equal to distributions in respect of certain XXXXXXXXXX pertaining to service XXXXXXXXXX ; and (ii) assets equal to distributions in respect of certain XXXXXXXXXX, pertaining to service prior to XXXXXXXXXX. As at XXXXXXXXXX , the assets in respect of the XXXXXXXXXX totalled $XXXXXXXXXX. These assets are currently held in XXXXXXXXXX Accounts.
11. The Trustees, the Association and the XXXXXXXXXX agreed that the XXXXXXXXXX Plan is to be amended to transfer all assets plus applicable earnings held XXXXXXXXXX and assets equal to contributions made in respect of participants who were XXXXXXXXXX for the period XXXXXXXXXX under the XXXXXXXXXX Plan plus applicable earnings to the XXXXXXXXXX.
12. During the period XXXXXXXXXX resided in Canada, the United States or Europe. During such periods, XXXXXXXXXX generally reported to work at the locations described in 13 to 17 below and travelled for work in the manner described in 13 to 17 below.
13. During the period XXXXXXXXXX, staff employees (persons who serviced a XXXXXXXXXX in an administrative position or as a personnel director or publicity director and who were designated as "Staff A Employees" or "Staff B Employees" by a XXXXXXXXXX) worked at and generally reported to work at the place of residence of XXXXXXXXXX.
14. XXXXXXXXXX.
15. XXXXXXXXXX.
16. XXXXXXXXXX.
17. XXXXXXXXXX.
18. XXXXXXXXXX.
19. XXXXXXXXXX.
20. XXXXXXXXXX.
XXXXXXXXXX
21. The XXXXXXXXXX Plan is registered under the Act and the XXXXXXXXXX under registration number XXXXXXXXXX and is also qualified under the Code; however, it is not subject to ERISA or the Labour Management Act.
22. The administrator and trustee of the XXXXXXXXXX Plan is a XXXXXXXXXX -member board of trustees, XXXXXXXXXX.
23. The XXXXXXXXXX Plan is a multi-employer defined contribution plan covering Canadian resident XXXXXXXXXX.
24. XXXXXXXXXX.
XXXXXXXXXX.
25. The U.S. XXXXXXXXXX Plan is not registered in Canada but is qualified under the Code and subject to ERISA.
26. XXXXXXXXXX.
27. The U.S. XXXXXXXXXX Plan is a multi-employer defined contribution plan covering U.S. resident XXXXXXXXXX.
28. XXXXXXXXXX.
29. XXXXXXXXXX.
Proposed Transactions
30. The Trustees and the Association intend to transfer, as set out below, to the Canadian and U.S. XXXXXXXXXX Plans: (i) assets and liabilities relating to contributions made in respect of XXXXXXXXXX under the XXXXXXXXXX Plan for the period XXXXXXXXXX and investment earnings thereon; and (ii) the XXXXXXXXXX under the XXXXXXXXXX Plan and investment earnings thereon. Subject to applicable pensions standards legislation and the Act, all such assets will be transferred to the Canadian XXXXXXXXXX Plan unless: (I) a XXXXXXXXXX elects to have assets held on his behalf transferred to the U.S. XXXXXXXXXX Plan subject to withholding tax under section 212 of the Act (as may be reduced by the Canada-U.S. Tax Convention, (1980), ("Canada/U.S. Tax Treaty") or such other tax treaty as may be applicable); or (II) a XXXXXXXXXX elects to have assets held on his behalf transferred to the U.S. XXXXXXXXXX Plan and such XXXXXXXXXX can certify to the applicable administrator that for purposes of the Act and the Canada/U.S. Tax Treaty or such other tax treaty as may be applicable, he was not resident in Canada for the taxation years to which the benefits relate or a portion thereof and was not employed in Canada or was only occasionally employed in Canada during such period or such portion thereof and is not currently resident in Canada such that assets held on his behalf can be transferred to the U.S. XXXXXXXXXX Plan without reduction for withholding tax under section 212 of the Act (as may be reduced by the Canada/U.S. Tax Treaty or such other tax treaty as may be applicable). The XXXXXXXXXX will be given notice of the proposed transfer of assets and a limited period of time within which an election may be made. In particular, subject to applicable pension standards legislation and the Act, assets currently held under the XXXXXXXXXX Plan in respect of XXXXXXXXXX will be transferred as follows:
a) assets currently held under the XXXXXXXXXX Plan in respect of contributions made for the period XXXXXXXXXX and investment earnings thereon in respect of XXXXXXXXXX will be transferred to the Canadian XXXXXXXXXX Plan;
b) notwithstanding 30(a), the portion of the assets currently held under the XXXXXXXXXX Plan in respect of contributions made for one or more taxation years during the period XXXXXXXXXX and investment earnings thereon in respect of XXXXXXXXXX who were not resident in Canada and not employed in Canada or only occasionally employed in Canada throughout the corresponding one or more taxation years and are not currently resident in Canada will be transferred to the U.S. XXXXXXXXXX Plan provided a valid election is made in respect of such transfer as set out above;
c) notwithstanding 30(a), the portion of the assets currently held under the XXXXXXXXXX Plan in respect of contributions made for one or more taxation years during the period XXXXXXXXXX and investment earnings thereon in respect of XXXXXXXXXX who were resident in Canada and/or employed in Canada or more than occasionally employed in Canada during the period XXXXXXXXXX or a portion thereof and who are not currently resident in Canada will be transferred to the U.S. XXXXXXXXXX Plan provided applicable withholding tax is paid and a valid election is made in respect of such transfer as set out above;
d) assets currently held under the XXXXXXXXXX Plan in respect of the XXXXXXXXXX will be transferred to the Canadian XXXXXXXXXX Plan;
e) notwithstanding 30(d), the portion of the assets currently held under the XXXXXXXXXX Plan in respect of the portion of the XXXXXXXXXX for one or more taxation years during the period of service to which the benefit relates for XXXXXXXXXX who were not resident in Canada and not employed in Canada or only occasionally employed in Canada throughout such taxation year(s) and are not currently resident in Canada will be transferred to the U.S. XXXXXXXXXX Plan provided a valid election is made in respect of such transfer as set out above; and
f) notwithstanding 30(d), the portion of the assets currently held under the XXXXXXXXXX Plan in respect of the portion of the XXXXXXXXXX for one or more taxation years during the period of service to which the benefit relates for XXXXXXXXXX who were resident in Canada and/or employed in Canada or more than occasionally employed in Canada throughout such taxation years and who are not currently resident in Canada will be transferred to the U.S. XXXXXXXXXX Plan provided applicable withholding tax is paid and a valid election is made in respect of such transfer as set out above.
31. The determination of whether a XXXXXXXXXX was "occasionally employed" in Canada during the period of service XXXXXXXXXX will be made in accordance with Nanne v. Canada, [1999] T.C.J. No. 871 (T.C.C.) ("Nanne").
Purpose of the Proposed Transactions
32. XXXXXXXXXX.
Ruling
Provided that the preceding statements constitute a complete and accurate disclosure of all of the relevant facts, proposed transactions and purpose of the proposed transactions and provided the proposed transactions are completed as described above, we rule as follows:
A. XXXXXXXXXX identified in Schedules A and B, described in 18, 19 and 20 above, who were employed by a U.S. XXXXXXXXXX and who were not resident in Canada during the period of service XXXXXXXXXX or a portion thereof, were "only occasionally employed in Canada" within the meaning of subparagraph 212(1)(h)(vi) of the Act during such period(s), or such portion thereof.
The above ruling, which is based on the Act in its present form and does not take into account any proposed amendments thereto, is given subject to the general limitations and qualifications set out in Information Circular 70-6R5 dated May 17, 2002, and is binding on the Canada Customs and Revenue Agency provided that the proposed transactions are completed by XXXXXXXXXX.
For greater certainty, the transfer of assets from the XXXXXXXXXX Plan and the XXXXXXXXXX Plan to the Canadian XXXXXXXXXX Plan will be made in accordance with the requirements under the Act respecting transfers to and from a registered pension plan. The transfer of assets from the XXXXXXXXXX Plan and the XXXXXXXXXX Plan to the U.S. XXXXXXXXXX Plan in respect of participants who were resident in Canada and/or employed in Canada or more than occasionally employed in Canada during the period to which the assets relate, will be made in accordance with applicable pensions standards legislation and will be subject to withholding tax under section 212 of the Act (as reduced by the Canada/U.S. Tax Treaty or such other treaty as may be applicable).
Yours truly,
XXXXXXXXXX
for Director
Financial Industries Division
Income Tax Rulings Directorate
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