23 March 1990 Internal T.I. 59719 F - Benefits Received Out of RPP

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.

March 23, 1990

Dear Sirs:

This is in reply to your letter of March 5, 1990 concerning benefits received out of a registered pension plan ("RPP") by a person resident in Canada where part of the pension entitlement was purchased while the person was not resident in Canada.

Benefits received out of an RPP by a person resident in Canada are required to be included in income under subparagraph 56(1)(a)(i) of the Income Tax Act (the "Act"), notwithstanding that the benefits are attributable to services rendered while the person was not resident in Canada.

You suggest in your letter that benefits received out of the RPP that are attributable to services rendered while the recipient was not resident in Canada are exempt under subparagraph 6(1)(g)(iii) of the Act.  However, paragraph 6(1)(g) of the Act applies only to benefits received out of or under an employee benefit plan, and part (a) of the definition of "employee benefit plan" in subsection 248(1) of the Act excludes therefrom a fund or plan described in subparagraph 6(1)(a)(i) of the Act.  One of the funds or plans described in subparagraph 6(1)(a)(i) is a registered pension fund or plan.  Thus, the provisions of paragraph 6(1)(g) are not applicable to benefits received out of an RPP.

In any event, a benefit described in subparagraph 6(1)(g)(iii) of the Act is not exempt from tax.  Rather, it is instead included in income under subparagraph 56(1)(a)(i) of the Act.  The effect of taxing such benefits received out of a non-registered pension plan under subparagraph 56(1)(a)(i) of the Act, rather than paragraph 6(1)(g) of the Act, was that such amounts qualified for a rollover to a registered retirement savings plan ("RRSP") under paragraph 60(j) of the Act.  Under proposed legislation introduced in December 1989, a benefit described in subparagraph 60(1)(g)(iii) will continue to qualify after 1989 for a rollover to an RRSP under paragraph 60(j), provided it is received in a lump sum (i.e. it is not one of a series of payments) and the recipient has not claimed a deduction under subparagraph 110(1)(f)(i) of the Act in respect thereof.

The above comments are an expression of opinion only and are not binding on the Department, as explained in paragraph 24 of Information Circular 70-6R.  We trust however that they are of assistance to you.

Yours truly,

for DirectorFinancial Industries DivisionRulings Directorate