Income Tax Severed Letters - 2023-04-12

Technical Interpretation - External

22 December 2022 External T.I. 2021-0911251E5 - CEWS - ECRA - Multiple publicly traded parents

Unedited CRA Tags
125.7

Principal Issues: For the purpose of the ECRA definition in subsection 125.7(1) of the Act, where an eligible entity is controlled by more than one publicly traded parent, who is the “public parent corporation”?

Position: The publicly traded parent at the top of the corporate structure.

Reasons: The law.

7 November 2022 External T.I. 2022-0926091E5 - Transfer of UK DB pension benefits to a UK SIPP

Unedited CRA Tags
56(1)(a); 94(1) "contribution"
Summary Under
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(a) - Subparagraph 56(1)(a)(i)
constructive receipt where commuted value of entitlements under a UK defined-benefit plan transferred directly to a UK self-invested personal pension plan
Summary Under
Tax Topics - Income Tax Act - Section 94 - Subsection 94(1) - Contribution
direct transfer from one group UK pension plan to an individual UK pension plan constituted a contribution by the individual to the latter
Summary Under
Tax Topics - General Concepts - Payment & Receipt
constructive receipt doctrine applied to direct payment from one UK pension plan to UK individual pension plan
Summary Under
Tax Topics - Income Tax Act - Section 56 - Subsection 56(2)
s. 56(2) application where direct transfer between UK pension plans

Principal Issues: (1) In a described situation, whether the amount transferred from a UK DB pension plan to a UK SIPP has to be included in the member’s income under paragraph 56(1)(a) in the tax year of the transfer. (2) Whether the transfer constitutes a “contribution” of property (within the meaning of subsection 94(1)) by the member to the trust governed by the UK SIPP.

Position: (1) Yes. (2) Yes.

Reasons: (1) The amount will have to be included in the member’s income under paragraph 56(1)(a) by virtue of the constructive receipt doctrine or by virtue of the application of subsection 56(2). (2) Paragraph (a) of the “contribution” definition.

2 February 2022 External T.I. 2021-0919071E5 - Transfer of an amount from a UK pension plan

Unedited CRA Tags
56(1)(a)(i); 60(j)(i); Canada-U.K. Income Tax Convention

Principal Issues: Whether a lump sum pension benefit received by a resident of Canada out of a defined contribution portion of a UK pension plan can be transferred to an RRSP pursuant to subparagraph 60(j)(i) of the Income Tax Act in the circumstances.

Position: Yes, provided all the conditions of the provision are satisfied.

Reasons: Based on the wording of the legislation.

Technical Interpretation - Internal

11 April 2023 Internal T.I. 2023-0964101I7 - Tax issues for cross-border employees

Unedited CRA Tags
s.126, Paragraph 2(b)(iii) of Article II, Article XVIII:10, 11, and Article XXIV:2 of the Canada-US Treaty.
Summary Under
Tax Topics - Treaties - Income Tax Conventions - Article 24
FICA contributions of a cross-border employee are deductible only re employment income from duties physically performed in the US
Summary Under
Tax Topics - Income Tax Act - Section 126 - Subsection 126(1)
employment income does not arise in the U.S. for Treaty purposes to the extent the duties are performed in a Canadian home office
Summary Under
Tax Topics - Treaties - Income Tax Conventions - Article 8
contributions to 401(k) plan not deductible to the extent the duties of employment were performed from a Canadian home office

Principal Issues: Where a cross-border employee's employment duties for the year are carried out partially in the U.S. and partially in Canada, (1) are the FICA contributions made in respect of duties exercised in Canada eligible for a foreign tax credit, and (2) how would this affect the deductibility of any 401(k) contributions made in that year ?

Position: (1) only FICA contributions made on employment income relating to the duties performed while the individual was physically present in the U.S. would qualify for foreign tax credit; (2) only 401(k) contributions attributable to the services performed while the individual was physically present in the U.S. would be deductible in computing taxable income in Canada.

Reasons: (1) the words of Article XXIV:2 of the Canada-US Treaty; (2) the words of Article XVIII:10 of the Canada-US Treaty.