2026 Ruling 2022-0929541R3 - XXXXXXXXXX Mandatory Provident Fund

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.

Principal Issues: In a described situation, can the taxpayer transfer an amount currently held in a registered scheme established under XXXXXXXXXX Mandatory Provident Fund system to her RRSP under paragraph 60(j) of the Act?

Position: Yes.

Reasons: The conditions of paragraph 60(j) are satisfied.

XXXXXXXXXX 2022-092954

Dear XXXXXXXXXX:

Re: Advance Income Tax Ruling Request – XXXXXXXXXX Mandatory Provident Fund scheme (“MPF Plan”)
XXXXXXXXXX (the “Taxpayer”)

This is in reply to your letter of XXXXXXXXXX requesting an advance income tax ruling (“Ruling”) on behalf of the above-named Taxpayer. We also acknowledge the information provided by email and in telephone conversations.

To the best of your knowledge and that of the taxpayers involved, none of the proposed transactions or issues involved in this Ruling request are the same as or substantially similar to transactions or issues that are:

i. in a previously filed tax return of the Taxpayer or a related person and:

A. being considered by the CRA in connection with such return;

B. under objection by the Taxpayer or a related person; or

C. the subject of a current or completed court process involving the Taxpayer or a related person; or

ii. the subject of a Ruling request previously considered by the Income Tax Rulings Directorate.

Definitions

Unless otherwise stated:

(i) all references to a statute are to the relevant provision of the Income Tax Act, R.S.C. 1985 (5th Supp.), c.1, as amended, (the “Act”), or, where appropriate, the Income Tax Regulations, C.R.C., c. 945, as amended, (the “Regulations”);

(ii) all terms and conditions used in this Ruling that are defined in the Act (or in the Regulations) have the meaning given in such definition;

(iii) all references to monetary amounts are in Canadian dollars; and

(iv) the singular should be read as plural and vice versa where the circumstances so require.

The following abbreviations, terms and expressions have the meanings specified, and the relevant parties to the Proposed Transactions (as defined below) will be referred to as follows:

“CRA” refers to the Canada Revenue Agency.

“Employer” means XXXXXXXXXX.

“MPF Ordinance” means the Mandatory Provident Fund Schemes Ordinance of XXXXXXXXXX.

“MPF Plan” means a scheme established under the MPF Ordinance.

“MPFSA” means the Mandatory Provident Fund Schemes Authority, a statutory body established under the laws of XXXXXXXXXX to regulate and supervise the operation of schemes established under the MPF Ordinance and the ORS Ordinance.

“ORS Ordinance” means the Occupational Retirement Schemes Ordinance of XXXXXXXXXX.

“ORSO Plan” means a scheme established under the ORS Ordinance.

“Proposed Transactions” means the transactions described in Paragraphs 15 to 19.

“RCA” means a retirement compensation arrangement as that term is defined in subsection 248(1) of the Act.

“RRSP” means a registered retirement savings plan as that term is defined in subsection 248(1) of the Act.

“T1 return” means a T1 Income Tax and Benefit Return.

FACTS

A complete description of all the relevant facts is as follows:

1. The Taxpayer is XXXXXXXXXX of age as of the date of this letter. Until XXXXXXXXXX, she was not resident in Canada for the purposes of the Act and was resident in XXXXXXXXXX. Since XXXXXXXXXX, she has been a resident of Canada for purposes of the Act.

2. The Employer was the Taxpayer’s employer from XXXXXXXXXX. The Employer’s business is carried on in XXXXXXXXXX and has no connection to Canada.

3. In connection with that employment, the Taxpayer joined an ORSO Plan in XXXXXXXXXX with the Employer as the employer. The ORSO Plan was set up voluntarily by the Employer for its employees. The Employer made all contributions to the ORSO Plan in connection with Taxpayer during the Taxpayer’s employment periods; the Taxpayer did not make any contributions.

4. The Taxpayer resigned from employment with the Employer in XXXXXXXXXX; no contributions were made by the Employer to the ORSO Plan in connection with the Taxpayer’s service after this time.

5. In XXXXXXXXXX, the Taxpayer transferred the amount of her entitlements under the ORSO Plan to an account in her name under the MPF Plan in accordance with XXXXXXXXXX law. No employer or employee contributions have been made to the MPF Plan in respect of the Taxpayer since that time, other than a nominal amount contributed by the Taxpayer to open the account.

6. Both the ORSO Plan and the MPF Plan are regulated by the MPFSA.

7. The ORSO Plan is a pension plan for the purposes of the Act. It is not an RCA in whole (or in any part with respect to the Taxpayer).

8. The MPF Plan is a pension plan for the purposes of the Act. It is not an RCA in whole (or in any part with respect to the Taxpayer).

9. No amount was includable in the Taxpayer’s income under the Act in connection with the transfer of the Taxpayer’s entitlements under the ORSO Plan to the MPF Plan as described in Paragraph 5.

10. The Canadian dollar equivalent of the Taxpayer’s entitlements under the ORSO Plan as of XXXXXXXXXX (the month-end immediately before she became a Canadian tax resident) was approximately $XXXXXXXXXX.

11. The Taxpayer has the right, pursuant to the MPF Ordinance and the MPF Plan, to make full or partial withdrawals from the MPF Plan in respect of her entitlements under the MPF Plan in lump-sum payments as and when desired as having left XXXXXXXXXX permanently.

12. The Taxpayer made multiple partial withdrawals, in lump-sum payments, in respect of her entitlements under the MPF Plan in XXXXXXXXXX and XXXXXXXXXX. Those withdrawals have been or will be included in the Taxpayer’s T1 returns for those respective years as taxable income. The total of these partial withdrawals is greater than the total of the portion of the Taxpayer’s entitlements under the ORSO Plan that accrued during the period in which the Taxpayer was resident in Canada, plus any investment income earned thereon in the MPF Plan.

13. The Canadian dollar equivalent of the Taxpayer’s remaining entitlements under the MPF Plan as of XXXXXXXXXX is approximately $XXXXXXXXXX after taking into account the partial withdrawals referred to in Paragraph 12. These remaining entitlements of the Taxpayer under the MPF Plan are wholly attributable to services rendered by her during a period throughout which she was not resident in Canada.

14. Pursuant to the MPF Ordinance and the MPF Plan, the Taxpayer is entitled to receive her remaining entitlements under the MPF Plan in the form of a lump-sum payment to her on a taxable basis in XXXXXXXXXX.

PROPOSED TRANSACTIONS

15. The Taxpayer will establish an RRSP and the Taxpayer will be the annuitant under the RRSP.

16. The Taxpayer will notify the administrator of the MPF Plan and make arrangements for her remaining entitlements under the MPF Plan to be withdrawn in XXXXXXXXXX as a lump-sum payment (the “Lump-sum Payment”). The Lump-sum Payment is a commutation payment and is not a part of a series of periodic payments.

17. The Taxpayer will make a contribution (the “Contribution”), not exceeding the amount of the Lump-sum Payment (converted into Canadian dollars at the exchange rate in effect at the time of receipt), to the RRSP in XXXXXXXXXX or within 60 days after the end of that year.

18. The Taxpayer will report the amount of the Lump-sum Payment (converted into Canadian dollars at the exchange rate in effect at the time of receipt) in her income as a superannuation or pension benefit on her T1 return for XXXXXXXXXX.

19. The Taxpayer will designate, pursuant to subparagraph 60(j)(iii), the amount of the Contribution in Part C of Schedule 7 of her T1 return for XXXXXXXXXX.

PURPOSE OF THE PROPOSED TRANSACTIONS

The purpose of the Proposed Transactions is to allow the Taxpayer to transfer her remaining benefit entitlements under the MPF Plan to her RRSP as she does not plan to return to reside in XXXXXXXXXX and wishes to ease her tax compliance requirements.

RULINGS GIVEN

Provided that the preceding statements constitute a complete and accurate disclosure of all the relevant facts, proposed transactions and purpose of the proposed transactions, and provided further that the Proposed Transactions are carried out as described above, our rulings are as follows:

A. The amount of the Lump-sum Payment (converted into Canadian dollars at the exchange rate in effect at the time of receipt) will be included in the Taxpayer’s income for XXXXXXXXXX as a superannuation or pension benefit under subparagraph 56(1)(a)(i) and will be required to be reported in the Taxpayer’s T1 return for XXXXXXXXXX.

B. The Taxpayer will be entitled to a deduction under paragraph 60(j) for the amount of the Contribution.

These rulings are subject to the limitations and qualifications set out in Information Circular IC 70-6R12, Advance Income Tax Rulings and Technical Interpretations, dated April 1, 2022 and are binding on the CRA provided that the Proposed Transaction described in Paragraph 17 is completed by XXXXXXXXXX.

The above rulings are based on the law as it reads at the date of this letter and do not take into account any proposed amendments to the Act and the Regulations which, if enacted into law, could have an effect on the rulings provided herein.

COMMENTS

Nothing in this letter should be construed as implying that the CRA has confirmed, reviewed or made any determination in respect of any tax consequences relating to the facts and proposed transactions herein, other than those specifically described in the rulings given above. The documentation submitted with your request that is not described above does not form part of the facts and transactions and any references to the documentation are provided solely for the convenience of the reader.

Yours truly,

XXXXXXXXXX
A/Section Manager
for Division Director
Financial Industries and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch