28 November 2003 External T.I. 2003-0047255 - RETIRING ALLOWANCE FOREIGN EMPLOYER

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 years of employment with a foreign employer be eligible for purposes of the paragraph 60(j.1) transfer?

Position: Yes, subject to the conditions of paragraph 60(j.1).

Reasons:

If the foreign employer is considered a person related to the employer for purposes of 60(j.1) the years of employment with the foreign employer may be included for purposes of calculating the amount that can be transferred under 60(j.1).

XXXXXXXXXX 							2003-004725
G. Allen
November 28, 2003

Dear XXXXXXXXXX:

Re: Retiring Allowance 60(j.1) - Foreign Employer

This letter is a reply to your letter dated November 5, 2003 wherein you requested our opinion concerning whether years when an employee was employed with a foreign employer may be included for purposes of calculating the amount of a retiring allowance that is eligible to be transferred under paragraph 60(j.1) of the Income Tax Act (the "Act").

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advanced Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant tax services office. The following comments are, therefore, of a general nature only and are not binding on the Canada Customs and Revenue Agency ("CCRA"). All publications referred to herein can be accessed on the CCRA website at the following address: http://www.ccra-adrc.gc.ca/tax/technical/incometax/menu-e.htm l.

The CCRA's general views regarding retiring allowances are contained in Interpretation Bulletin IT-337R4, "Retiring Allowances."

Paragraph 60(j.1) of the Act limits the amount of a retiring allowance that may be transferred to a taxpayer's RRSP. Clause 60(j.1)(ii)(A) of the Act includes in the limit:

$2,000 times the number of years before 1996 during which the employee or former employee in respect of whom the payment was made (referred to hereafter as the "retiree") was employed by the employer or a person related to the employer.

For purposes of clause 60(j.1)(ii)(A) of the Act, a person related to the employer includes not only those persons related under section 251 (see the current version of IT­419, Meaning of Arm's Length) but also includes, by virtue of subparagraphs 60(j.1)(iv) and (v),

1. any person whose business was acquired or continued by the employer, and

2. any previous employer of the retiree whose service therewith is recognized in determining the retiree's pension benefits.

It is a question of fact whether an employer is a person related to the employer for purposes of clause 60(j.1)(ii)(A) of the Act and this determination could only be made after a review of all of the relevant facts, in the context of an advance income tax ruling. However, in our opinion, there is nothing in clause 60(j.1)(ii)(A) that would prevent years of employment with a foreign employer, who is a person related to the employer for purposes of clause 60(j.1)(ii)(A), from being included in the calculation under clause 60(j.1)(ii)(A) of the Act.

We trust the above comments will be of assistance.

Yours truly,

Roberta Albert, CA
Manager
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch