24 March 1994 External T.I. 9331415 - RRIF PAID TO UK PERSON-PENSIONS & ANNUITIES(U4-100-17)

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

			File #933141

Principal Issues:

Whether periodic pension payments out of a RRIF are exempt from tax under paragraph 1 of Article XVII of the Canada-UK Convention which deals with pension payments.

Position TAKEN:

YES. Periodic pension payments out of a RRIF are exempt from tax under paragraph 1 of Article XVII of the Canada-UK Convention.

Reasons FOR POSITION TAKEN:

There is a technical argument that periodic pension payments from a RRIF are "annuities" by virtue of that definition in section 5 of the ITCIA. However, the definition for "pension" in paragraph 3 of Article XVII of the UK Convention indicates that periodic pension payments from a RRIF were intended to be considered as pensions for the purposes of Article 17 and that they were to be exempt from tax under paragraph 1 of Article XVII. Thus, it is our view that the intention of the provisions of the UK Convention should prevail. Furthermore, it would not be reasonable to tax periodic pension payments from a RRIF under paragraph 2 of Article XVII as annuities by virtue of amendments to the ITCIA when such payments were previously exempt from tax as pensions under paragraph 1 of Article XVII. To the best of our knowledge, there was no intention in amending the ITCIA to treat periodic pension payments as annuities so that the annuity provision of an income tax convention would apply rather than the pension provision, especially where a convention such as the UK Convention specifically contemplated that payments similar to periodic pension payments would be dealt with under the term "pension".

			933141

XXXXXXXXXX G. Middleton

March 24, 1994

Dear Sir:

This is in reply to your letters requesting our views on the tax treatment under the Canada-United Kingdom Income Tax Convention (the "UK Convention") for distributions from a Registered Retirement Income Fund ("RRIF") to a resident of the UK.

The definition of "periodic pension payment" is found in section 5 of the Income Tax Conventions Interpretation Act (the "ITCIA"). In general, the definition states that a "periodic pension payment" does not include payments out of a RRIF where the total of all payments under the RRIF at, or before, the time of payment and in the calendar year exceeds the greater of:

(a) twice the amount that would be the minimum amount under the fund for the year, and

(b)10% of the amount that would be the fair market value of the property held in connection with the fund at the beginning of the year

if all property transferred in the year and before that time to the carrier of the fund as consideration under the fund had been transferred immediately before the beginning of the year and if the definition "minimum amount" in paragraph 146.3(1)(b.1) of the Income Tax Act were applicable with respect to all RRIFs.

If a payment out of a RRIF qualifies as a "periodic pension payment", as defined under the ITCIA, and it is paid to a resident of the UK, such a payment will be exempt from Canadian non-resident withholding taxes pursuant to Article XVII of the UK Convention.

We trust that our comments will be of assistance to you.

Yours truly,

for Director
Reorganizations and Foreign Division
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch