6 July 1989 Income Tax Severed Letter 5-8279

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.

• 5- 8279 A.B. Adler (613) 957-8962

XXX

Attention: XXX

July 6, 1989

Dear Sirs:

This is in reply to your letter dated June 19, 1989 in which you requested our views concerning the application of certain provisions of the Canada-U.K. Tax Convention - 1978 (Treaty) and of the Income Tax Act (Act) to residents of the United Kingdom(U.K.)

Our comments follow:

• 1. Periodic payments out of an RRSP that arise form a life annuity or a fixed term annuity as contemplated in the definition of "retirement income" in paragraph 146(1)(i.1) of the Act are considered to be pension payments out of a retirement plan and are granted relief under Article 17(1) of the Treaty. However, "pensions" thereunder do not include lump sum payments out of an RRSP and such payments therefore are subject to the maximum 25% withholding tax rate under Part XIII of the Act.
• 2. For purposes of interpreting international tax treaties it is generally our view that a pension plan is a plan that provides the beneficiary with periodic payments for life. Further, a RRIF generally qualifies as such a plan where the annuitant draws only the "minimum amount" as defined in paragraph 146.3(1)(b.1) of the Act each year as this will provide a schedule of equal payments to age 90. Such amounts fall under Article 17(1) of the Treaty. Where payments in excess of the "minimum amount" are withdrawn form a RRIF in a year it is generally our view that such payments are not periodic payments, and are subject to the 25% rate of tax withholding under paragraph 212(1)(q) of the Act. Further, such payments may be excluded from the definitions of "annuity" and "pension" in Articles 17(3) and (4) of the Treaty since those definitions both exclude payments in settlement of all future entitlements.
• 3. A U.K. resident who elects under section 217 of the Act to file a return of income under Part I of the Act for a year must include in income all relevant amounts referred to in subparagraph 217(b)(i). However, by reason of the combined application of subparagraphs 110(1)(f)(i) and 217(b)(ii) of the Act periodic pension or RRSP payments may be deductible in arriving at the taxpayer's taxable income for the year. Where a deduction is claimed pursuant to subparagraph 110(1)(f)(i) and to a provision of the Treaty, the taxpayer must indicate the relevant article of the Treaty on his return of income for the year.

We trust that our comments will be of assistance to you.

Yours truly,

for Director
Financial Industries Division
Rulings Directorate