9 April 1992 External T.I. 9203645 F - Non Resident Beneficiary Of Employee Profit Sharing Plan

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.

          24(1)     D. S. Delorey

               (613) 957-8953

Attention:  19(1)

April 9, 1992

Dear Madam:

This is in reply to your letter of February 5, 1992 concerning allocations under an employee profit sharing plan ("EPSP") to a non-resident of Canada.

Our comments with respect to the different situations presented in your letter are as follows:

A.     To the extent that an allocation under an EPSP of employer contributions relates to duties performed outside Canada by a non-resident employee, the allocation is not required to be included in computing the non-resident employee's taxable income earned in Canada under subsection 2(3) of the Income Tax Act (the "Act").

B.     The comments in A above would also apply to the allocation to a non-resident employee of the growth in the EPSP, including interest and dividends, to the extent that the growth is attributable to employer contributions that relate to duties performed outside Canada.

C.     Part XIII tax would not apply to the allocations in A and B above.  With respect to the deeming provisions in subsections 144(8) and (8.2) of the Act (i.e., deemed receipt of dividends and interest respectively), it is our view that the deemed receipts under those provisions do not constitute the payment or crediting, or deemed payment or crediting, of dividends or interest for the purposes of Part XIII of the Act.

D.     The allocated amounts discussed in A and B above are not considered to be "amounts required to be included in computing income" for the purposes of paragraph 144(7)(b) of the Act.  Therefore, where a non-resident person returns to Canada, he will be subject to tax under paragraph 6(1)(d) of the Act on amounts received out of an EPSP that are in respect of those allocations.

Although not asked, we consider it prudent to mention that any portion of an allocation to a non-resident person under an EPSP that relates to duties performed in Canada is required to be included in computing the non-resident    person's taxable income earned in Canada, pursuant to subsections 2(3), 115(1) and 144(3) and paragraph 6(1)(d) of the Act.

Our comments are an expression of opinion only and are not binding on the Department as explained in paragraph 21 of Information Circular 70-6R2.  We trust, however, that they are of assistance.

Yours truly,

for DirectorFinancial Industries DivisionRulings Directorate