2 February 1988 Income Tax Severed Letter 5-5010A

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.

Further to our telephone conversation, we are forwarding XXX letter of October 23, 1987 together with a copy of our reply dated January 19, 1988.

XXX

In computing the amount of pension income subject to tax in XXX pursuant to paragraph 212(1)(h) of the Income Tax Act, a deduction of $10,000 was properly allowed by Jonquiere in accordance with Article XVII of the Canada-United Kingdom Income Tax Convention (1978) ("former Article XVII").

Former Article XVII was amended by a Protocol which entered into force on December 5, 1985 with the effect that any Canadian-sourced pensions paid on or after April 6, 1986 to a resident of the United Kingdom are no longer subject to Canadian taxation. No transitional provisions accompanied this amendment in the Protocol.

XXX

Jonquiere Taxation Centre Contract Mrs. Michelle Boucher ((418) 548-0248) advises that XXX was reassessed by their Non-Resident Section upon instructions from the Quebec District Office. XXX was among approximately XXX such non-resident pensioners so re-assessed, all of whom have objected to said reassessments in their entirety.

XXX has also written to the Jonquiere T.C. in this regard and her letter has been passed to the Quebec D.O. for their consideration.

With respect to the interest burden on the payee, we would ask you to consider the following comments.

While it appears that the assessment of XXX is technically correct and in accordance with TOM 3763.3, we feel that based on the circumstances in this case the taxpayer has a very good argument for not being assessed interest on taxes arising up until the date of assessment. It should be noted that the payor failed to withhold at least for XXX and, for all we know, from XXX and possibly prior taxation years, the payor filed the proper form NR4A showing no withholding tax; and until XXX the Department took no action in spite of being in receipt of copies of the NR4A's.

We agree that once a valid assessment of interest is raised it can not be reversed; but, as indicated in TOM 3763.3(4), because of the circumstances it may be possible that this is an instance where the payor could be assessed to remove the interest burden from the payee by cancelling the assessment on the payee and assessing a payor, XXX. Although we are not aware of all of the circumstances of the case, we have attached a memo of April 1, 1986, RAK 8235-4 to Saint John D.O. which may be a precedent for assessing the payor.

As you are aware, this matter is very urgent as interest continues to accrue on the assessed taxes and XXX time to request a refund in the United Kingdom may be running out.

We have advised XXX that any further enquiries should be addressed to the Jonquiere Taxation centre.