28 February 1990 Administrative Letter 59526 F - Amounts Paid Out of an RRSP to a Non-resident

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.

February 28, 1990

Dear Madam:

This is in reply to your enquiry of February 5, 1990 concerning amounts paid out of a registered retirement savings plan ("RRSP") to a non-resident.  The order of our reply follows that set out in your query.

1.     Excess Contribution

(a)      The payment to a non-resident of an amount out of his RRSP in respect of a non-deductible excess contribution to the RRSP is subject to a 25% Part XIII tax by virtue of paragraph 212(1)(1) of the Income Tax Act (the "Act"), since such amount is one "that would, if the non-resident had been resident in Canada throughout the taxation year in which the amount was paid, be required by section 146 to be included in computing his income for the year".

(b)      As indicated in the latter part of subsection 146(8.2) of the Act, a deduction under that subsection is available only where the related amount was included in the recipient's income.  Thus, a deduction under subsection 146(8.2) is not available where the amount of the excess contribution was subject to Part XIII tax; i.e., where the amount was not included in computing the recipient's income under Part I of the Act.

(c)      With respect to (b) above, a deduction under subsection 146(8.2) of the Act would be available where the amount received in respect of the excess contribution was included in income under Part I of the Act by virtue of a section 217 election.

(d)       An individual who has an "excess amount for a year in respect of registered retirement savings plans", as defined in section 204.2 of the Act, is subject to a tax under Part X.1 of the Act of 1% of the excess amount at the end of each month.

(e)       In certain circumstances, it may be possible for a taxpayer in the above-noted situation to extricate himself from his predicament by advising the trustee or issuer of the RRSP of the circumstances involved, submitting all available copies of the relevant receipts issued for contributions made to the RRSP and asking the trustee or issuer to request a retroactive annulment of his RRSP.  The trustee or issuer of the RRSP should send their application for the annulment to:

          Revenue Canada, Taxation     Registrations Directorate     Pension and Profit Sharing Plans Section     400 Cumberland Street     Ottawa, Ontario     K1A 0L8

     If the non-resident's RRSP is retroactively annulled, income credited thereto would be subject to Part XIII tax in the year the income was credited to the RRSP.

2.     Where annuity payments are received out of an RRSP by a person resident in Australia, the 25% Part XIII tax is reduced to 15% by virtue of Article 18 of the Canada-Australia Income Tax Convention Act, 1980.

3.     The reduced 15% rate referred to in 2 above would not apply to a lump sum amount received by the Australian resident as a refund of excess contributions made to his RRSP.

We trust our comments are of assistance to you.

Yours truly,

for DirectorFinancial Industries DivisionRulings Directorate