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.
Principal Issues:
1.Whether a non-resident must file an income tax return with respect to a payment from a RESP?
2.Whether non-resident beneficiary of a RESP must pay tax on payment received from a RESP?
Position TAKEN:
1.A non-resident does not have to file a return if he has not ceased to be resident in Canada to attend a post-secondary educational institution.
2.Such non-resident is subject to tax under 212(1)(r) and XXII of Canada-U.S. Income Tax Convention.
Reasons FOR POSITION TAKEN:
1.115(2)(b), 115(2)(e)(iv), 115(1)(a)(v).
5-950038
XXXXXXXXXX Robert Gagnon
March 1, 1995
Dear Sir:
Re: Registered Education Savings Plan
This is in reply to your letter of December 20, 1994 wherein you requested a technical interpretation concerning your Registered Education Savings Plan ("RESP").
For the purposes of this letter, a refund of payment means any amount paid to a subscriber of a RESP on account of a refund of amounts paid by the subscriber to the plan; on the other hand, an educational assistance payment means any amount, other than a refund of payments, paid under a RESP to a beneficiary to assist him to further his post-secondary education.
It is our view that where a subscriber of a RESP emigrates to the United States and ceases to be resident in Canada for the purposes of the Income Tax Act ("Act"), the subscriber can continue to contribute to the plan within the limits provided in the Act for RESP. However, such a subscriber and the beneficiaries of a RESP should determine the tax consequences of their participation in a RESP under the tax laws of the United States. The Department is not in a position to answer questions concerning the tax laws of that country.
No tax is payable on a refund of payments by a RESP to a subscriber. Where a non-resident receives educational assistance payment from a RESP, he does not have to file an income tax return with respect to this payment if he has not ceased to be resident in Canada to attend a post-secondary educational institution. Such a non-resident beneficiary of an educational assistance payment from a RESP is nevertheless subject to Canadian tax. The tax is paid on behalf of the non-resident by the Canadian payer who is required to remit the appropriate tax to the Canadian government. The payer must withhold the amount of the tax from the payment and remit only the net amount to the non-resident.
Where an educational assistance payment represents income of the RESP arising in Canada, the tax with respect to such a payment from a RESP which is a trust to a resident of the United States for the purposes of the Canada-U.S. Income Tax Convention is imposed at a flat rate of 15 per cent of the payment. An amount distributed from the income of the trust arising out of Canada is exempt from tax in Canada.
The foregoing opinions are not rulings and, in accordance with the guidelines set out in Information Circular 70-6R2 dated September 28, 1990, are not binding on the Department.
We trust our comments will be of assistance to you.
Yours truly,
for Director
Financial Industries Division
Rulings Directorate
Policy & Legislation Branch
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