6 November 1990 Internal T.I. 901827 F - Lump Sum Transfers of Pension Funds Outside Canada

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.

Attention: Mr. Ken MorrisseyAdvisory Services Group

November 6, 1990

Dear Sirs:

This is in reply to your letter of August 1, 1990 concerning lump sum transfers of pension funds outside of Canada.

Paragraph 212(1)(h) of the Income tax Act requires a 25% withholding tax on a payment of a superannuation or pension benefit other than those payments specified in subparagraphs (i) to (iv) inclusive, and except such portion, if any, of the payment as may reasonably be regarded as attributable to services rendered by the person in taxation years at no time during which he was resident in Canada, and throughout which he was not employed, or was only occasionally employed, in Canada.

Under the definition in subsection 248(1) of the Income Tax Act, a superannuation or pension benefit includes any amount received out of a superannuation or pension fund.

Accordingly, the transfer of funds from the Canadian pension plan to the Australian pension plan under a reciprocal pension transfer agreement would be subject to the withholding tax which is reduced to 15% in accordance with article 18 of the Canada-Australia Tax Convention.

Similarly, if the transfer agreement is not finalized and the taxpayer withdraws his own contributions to the Public Service Superannuation account while he is a resident of Australia, the payment of these funds would also be subject to paragraph 212(1)(h) withholding tax reduced to 15% pursuant to the Canada-Australia Tax Convention on any amount paid to the taxpayer as a payment of a superannuation or pension benefit.

It should be noted that the above is based on the limited information given in your letter and is therefore of a general nature. We trust, however, that it will be of assistance to you.

Yours truly,

for DirectorFinancial Industries DivisionRulings Directorate