6 August 2002 External T.I. 2002-0141355 - NON-RESIDENT SPOUSE REFUND OF PREMIUMS

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 a non-resident of Canada open an RRSP?

Position: Yes.

Reasons: There is nothing in the Act to prevent a non-resident from being the annuitant of an RRSP.

XXXXXXXXXX 			2002-014135
G. Kauppinen
August 6, 2002

Dear XXXXXXXXXX:

Re: Registered Retirement Savings Plan ("RRSP")

This is in reply to your letter dated May 10, 2002 regarding RRSPs.

Opinions concerning proposed transactions involving specific taxpayers will only be provided in response to a request for an advance income tax ruling. For more information concerning advance income tax rulings, please refer to Information Circular 70-6R5 dated May 17, 2002, issued by the Canada Customs and Revenue Agency. Copies of information circulars and interpretation bulletins are available from your local tax services office or on the Internet at the following site - http://www.ccra-adrc.gc.ca/formspubs/menu-e.html. However, we can provide you with the following general comments.

Specifically, you ask if your wife, who is both a citizen and a resident of Mexico, can open an RRSP to hold assets to be transferred from your RRSP after your death.

In our view, there is nothing in the Act that prevents a non-resident of Canada from being the annuitant of an RRSP even if the non-resident has never been a resident of Canada. The RRSP, being a separate entity for income tax purposes, will itself be resident in Canada. It is our understanding that our registered plans directorate will allow an RRSP to be opened for a non-resident annuitant without that non-resident having to obtain a Canadian social insurance number.

When you die, the fair market value of the assets held in your RRSP will be included in your income for tax purposes on your final income tax return pursuant to subsections 146(8.8) and 146(8) of the Income Tax Act ("Act"). If the assets held by your RRSP are paid to your wife as a consequence of your death before the RRSP matures, the payment will be considered to be a "refund of premiums" pursuant to the definition contained in subsection 146(1) of the Act and a deduction against the income inclusion discussed above will be allowed on your final income tax return pursuant to subsection 146(8.9) of the Act.

As noted in paragraphs 31 and 32 of Interpretation Bulletin IT-500R, Registered Retirement Savings Plan, Death of an Annuitant, and pursuant to paragraph 212(1)(l) of the Act, Canadian withholding tax will be payable on the transfer of funds from your RRSP to your non-resident wife unless:

1. your wife is named beneficiary of your RRSP directly (i.e., not by way of your will through your estate), and

2. the funds are transferred directly from your RRSP after your death:

? to an RRSP under which your wife is the annuitant,

? to acquire an annuity described in subparagraph 60(l)(ii) of the Act under which your wife is the annuitant, or

? to a Registered Retirement Income Fund ("RRIF") under which your wife is the annuitant, and

the amount transferred would be deductible to your wife under paragraph 60(l) of the Act if she were a resident of Canada. Note that your RRSP carrier would have to pay the amount directly to your wife's RRSP or RRIF or directly to the insurance company providing the annuity described in subparagraph 60 (l)(ii) of the Act. Your RRSP carrier must provide a Form NRTA1 - Authorization for Non-Resident Tax Exemption.

Whether or not your wife will have Mexican tax consequences on the above-noted transfer should be confirmed by reference to the Mexican tax rules and the Canada-Mexico Income Tax Convention.

The Canadian withholding tax on payments out of an RRSP to non-residents is generally 25% subject to any relief provided by a bi-lateral income tax agreement Canada may have with the country of the non-resident recipient. Since the Canada-Mexico Income Tax Convention ("Convention") does not have a definition of "pension", payments out of a Canadian RRSP will be considered "pension payments" for purposes of the Convention pursuant to the Income Tax Conventions Interpretations Act. However, paragraph 2 of Article 18 of the Convention only allows a reduction of the 25% rate in the case of periodic pension payments. Consequently, the applicable withholding rate will depend on whether your wife receives a lump sum or periodic payments from a Canadian RRSP.

We trust our comments will be of assistance to you.

Yours truly,

Mickey Sarazin, CA
for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch