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: Is a locked-in RRSP equivalent to a UK Occupational Pension Scheme?
Position: Unable to reply, would require an interpretation on UK law. Have provided general information on the taxation of any amounts transferred from the UK pension into an RRSP.
Reasons:
XXXXXXXXXX 2001-009978
Karen Power, CA
(613) 957-8953
February 13, 2002
Dear XXXXXXXXXX:
Re: Pension Money from England
We are writing in reply to your facsimile of August 31, 2001, requesting that we confirm that a "locked-in" registered retirement savings plan ("RRSP") would be equivalent to an Occupational Pension Scheme ("OPS") administered in the United Kingdom. We apologize for the delay in responding to your enquiry.
We are unable to confirm that a "locked-in" RRSP or any other Canadian retirement investment vehicle would be equivalent to an OPS. 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 have reviewed the "Occupational pensions - Your Guide" published in April 2001 and available on the internet at http://www.pensionguide.gov.uk/down/pm3.html. Based solely on the information provided therein, we are of the opinion that the arrangement may properly be described as a pension arrangement for purposes of the Income Tax Act (Canada) (the "Act").
Subject to certain limits imposed under the Act, an individual can provide for his or her retirement through tax assisted registered plans. The most common registered plans are registered pension plans ("RPP") and RRSPs. Under RPPs employers participate in the funding of the retirement benefits whereas the individual funds all of the benefits provided under RRSPs.
The Canada Customs and Revenue Agency (the "CCRA") has presented its general views with respect to superannuation and pension benefits in Interpretation Bulletin IT-499R entitled "Superannuation or pension benefits". Information concerning employee pension plans may be obtained in Information Circular IC 72-13R8 entitled "Employee Pension Plans". General information on RRSPs is available in IC 72-22R9 entitled "Registered Retirement Savings Plans". The CCRA's views regarding the transfer of amounts between registered plans are found in Interpretation Bulletin IT-528 entitled "Transfers of Funds Between Registered Plans". Copies of these publications are available at the following internet site: http://www.ccra-adrc.gc.ca/tax/technical/incometax/menu-e.html.
It is our understanding that Inland Revenue is familiar with Canada's registered plans and should be able to provide Britannic Assurance with assistance in determining whether the laws of the United Kingdom permit the transfer of UK pension schemes to foreign pension schemes. In determining which retirement plans are suitable for the transfer of the OPS, Britannic Assurance and the Inland Revenue may refer to the publications discussed above.
The following outlines the Canadian tax implications that would result where it is established that a transfer may be made to a Canadian RRSP.
An amount received by a Canadian resident from a foreign pension fund or plan is generally considered to be a "superannuation or pension benefit" as defined in subsection 248(1) of the Act. The amount would be taxable under subparagraph 56(1)(a)(i) of the Act even though the amount is attributable to services rendered while the recipient was not resident in Canada.
Subparagraph 60(j)(i) of the Act allows a deduction in computing income for Canadian income tax purposes for the amount of a lump-sum superannuation or pension benefit received out of a foreign pension plan that is contributed to a RPP or an RRSP. To be eligible for a deduction under paragraph 60(j) of the Act, the benefit received by the individual must be attributable to services rendered by the individual while that individual was not a resident of Canada and included in his or her income for the year under subparagraph 56(1)(a)(i) of the Act. Also, the contribution to a RPP or an RRSP has to be made in the year the amount is included in the individual's income or within 60 days after the end of the year that the amount is included in the individual's income. A deduction under subparagraph 60(j)(i) of the Act is not allowed if a deduction for the same pension benefit can be taken under subparagraph 110(1)(f)(i) of the Act because of a specific provision in a bilateral income tax convention (treaty) between Canada and the foreign country from which the foreign pension originates or for benefits that are part of a series of periodic payments. However, there is no provision in the Canada - U.K. Income Tax Treaty which would allow a deduction pursuant to subparagraph 110(1)(f)(i) of the Act.
As discussed above, please note that the CCRA cannot comment on the application of UK tax law in respect of this matter and cannot advise whether any taxes will be payable to the UK upon transfer of the amount out of the foreign plan.
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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