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 Department. Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Re: Transfer of Amounts from a Registered Pension Plan to a Pension in respect of U.S. Residents
This is in reply to your letter of December 14, 1987 which was forwarded to this Division by the Registered Pension and Deferred Income Plans Division and is further to our (XXX Dalphy) telephone conversation of February 16, 1988.
Our understanding of the situation is as follows:
- 1. X. Ltd. is a Canadian company that presently employs workers in both Canada and the U.S. The U.S. division is not a separate corporate entity.
- 2. When, several years ago, X. Ltd. transferred a number of its employees to the U.S., the Canadian pension entitlement of the transferred employees was left on a deferred basis in the Canadian registered pension plan. The transferred employees jointed another pension plan of X. Ltd. (the "new plan") which was established for them in respect of their service in the U.S.
- 3. X. Ltd. wishes to transfer the assets and liabilities of the Canadian registered pension plan in respect of the transferred employees to the new plan.
As we have not been provided with copies of the relevant pension plan documents, we are unable to provide you with a definitive response. Further, it appears that your request is in respect of a proposed transaction and, accordingly, a request for an advance income tax ruling would be appropriate. Nonetheless, we provide you with the following general comments:
Based on the limited information provided, it appears that paragraph 212(1)(h) of the Income Tax Act (the "Act") would apply such that an income tax of 25% would be payable upon the transfer to the new plan. As such a transfer could not be considered to be a payment described in paragraph 2(a), Article XVIII of the Canada-U.S. Income Tax Convention (1980) (the "Treaty"), the reduction described therein would not apply. If, however, the new plan is a Canadian registered pension plan, you may wish to consider the exemption described in subparagraph 212(1)(h)(iii) of the Act (in this respect, we refer you to paragraph 27 of Information Circular 79-8R2). Finally, with regard to the eventual payments of periodic pension benefits to retirees, we refer you to Interpretation Bulletin IT-76R2 (regarding subparagraphs 212(1)(h)(v) and (vi) of the Act), paragraph 2(a), Article XVIII of the Treaty, and the election described in section 217 of the Act.
Should you wish to request an advance income tax ruling in respect of the transactions described above, we would be pleased to give further consideration to this situation.
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