9 April 1987 Income Tax Severed Letter 5-2310 - [XXXX]

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.

A. Jane (613) 957-2126

XXXX

April 9, 1987

INDEXED

Re: Article XVIII Canada-U.S. income Tax Convention

This is in reply to your letter of October 1, 1986 in connection with the above noted matter. We apologize for the delay in replying. You have asked us to confirm your views concerning the withholding rate applicable in respect of payments out of a Registered Retirement Income Fund (a "RRIF") to a resident of the United States, which we re-state as follows:

1) As the Income Tax Act (the "Act") formerly provided for a stipulated predetermined amount to be paid out of a RRIF it would appear that such stipulated predetermined payments qualified as periodic pension payments for purposes of Article XVIII(2)(a) of the Canada- U.S. Income Tax Convention (1980) (the "Convention"). Thus, in your view, withholding in respect of such stipulated predetermined payments made to a resident of the United States should be reduced by the Convention to 15% if the recipient is the beneficial owner of such payments.

2) In your view if a resident of the United States draws any amount out of a RRIF in excess of the minimum amount as now provided for in paragraphs 146.3(1)(b.1) and 146.3(1)(f) of the Act, the correct withholding rate is 15%.

We confirm your view as set forth in 1) above. Item 2) concerns the question of whether an amount paid out of a RRIF in excess of the minimum amount qualifies as a periodic pension payment for purposes of the Convention. Determinations of this nature are essentially a question of fact to be made after an examination of all the relevant facts in each case. In addition to examining all the facts this question may require a determination of the intent of the legislators and drafters of the Convention.

With this in mind, and although not free from doubt, it is our view that the term "periodic pension benefits" in the Convention generally means a series of payments made for the purpose of providing the recipient with retirement income throughout the greater part of his retirement years. Consistent with this interpretation, in order for payments out of a RRIF to qualify for the lower withholding rate under Article XVIII(2)(a) of the Convention, in our view the payments must be made as part of a series of payments over the greater part of the remainder of the recipient's life. Again, each case must be examined on its own facts.

We trust this will be of some assistance.

Yours truly,

for Director Reorganizations and Non-Resident Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch