24 July 1992 Income Tax Severed Letter 9218025 - Taxable Benefits under Foreign Pension 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.

5-921802
                                              P. Spice
        24(1)                      (613) 957-8953

Attention: 19(1)

July 24, 1992

Dear Sirs:

Re:  Request for Technical Interpretation
                  24(1)

This is in reply to your letter of June 5, 1992, in which you ask for a technical interpretation of various sections of the Income Tax Act (the "Act") and Article XV of the Canada-Switzerland Income Tax Convention.

As the particular circumstances outlined in your letter involve actual taxpayers and a pension plan already in place, we are unable to respond to your request. In order to obtain the Department's views on this matter you may submit all the relevant facts and documentation, including a copy of the employees pension plan, to the appropriate District Taxation Office for their comments. We can provide the following general comments, although please note that they are not binding on the Department.

A foreign pension plan is usually considered to be an employee benefit plan and not a salary deferral plan for purposes of the Act. As you point out, the definition of a "retirement compensation arrangement" ("RCA") in subsection 248(1) of the Act excludes a pension plan maintained primarily for non-residents unless it is caught by subsection 207.6(5) of the Act. Given the conditions in that subsection, an arrangement for the Canadian resident beneficiaries of the foreign pension plan will be an employee benefit plan ("EBP") for the first five years of the employee(s)' residence in Canada, and, pursuant to paragraph 6802(e) of the Income Tax Act Regulations, could remain an EBP and exempt from the RCA rules for years prior to 1992 where it meets the prescribed conditions therein.

Benefits under either an employee benefit plan or a retirement compensation arrangement, whether from employer contributions or out of plan earnings, are not taxable under section 6 in accordance with subparagraph 6(1)(a)(ii) of the Act.

Where the pension plan is non-contributory, amounts when receivable out of an EBP by a Canadian resident are taxable in accordance with paragraph 6(1)(g) to the extent that they are attributable to services rendered while a Canadian resident; amounts out of the plan which are not attributable to such service would be taxed under paragraph 56(1)(a) of the Act.

In the same circumstances, amounts receivable by a non- resident will be taxed as described in paragraph 14 of Interpretation Bulletin IT-502 .

A Swiss resident who is taxed in Switzerland on amounts out of the EBP in accordance with Article XV of the Canada- Switzerland Income Tax Convention would be entitled to a deduction under subparagraph 110(1)(f)(i) of the Act.

If the employee's contribution is paid to the plan by the employer, in our view subsection 56(2) of the Act might apply to include the amount in the employee's income.

Yours truly,

for Director Financial Industries Division Rulings Directorate

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