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.
K.B. Harding (613) 957-2129
JUL 6, 1988
Dear Sirs:
This is in reply to your letter of April 15, 1988 concerning withholding tax on payments made out of a Registered Retirement Saving Plan (RRSP) to a U.S. resident.
It is our view that the definition of pensions as defined in paragraph 3 of Article XVIII of the Canada-U.S. Income Tax Convention (Convention) would include amounts paid out of either an RRSP or a Registered Retirement Income Fund (RRIF). Accordingly, an amount paid out of an RRSP or RRIF would also fall within paragraphs 1 and 2 of that Article.
Paragraph 2 of Article XVIII requires Canada to reduce its withholding tax rate from 25 to 15% with respect to "periodic pension payments" made by a resident of Canada to a U.S. resident who is the beneficial owner thereof. It is our view that the term "periodic pension payments" means a series of regular payments made throughout the life or for a greater part of the life of the recipient for the purpose of providing the recipient with retirement income. Such payments out of RRSPs and RRIFs for a term ending at age 90 would qualify as a periodic pension benefit for purposes of a tax agreement or convention.
Accordingly, the reduced rate of withholding tax provided under paragraph 2(a) of Article XVIII of the Convention would only apply to these amounts which qualified as "periodic pension payments" as set out above. All other payments made out of an RRSP or RRIF would be subject to 25 % withholding tax in accordance with paragraphs 212(1)(1) and (q) of the Income Tax Act.
We trust these comments are suitable for your purposes.
for Director Reorganizations and Non-Resident Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch
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