10 May 1995 Internal T.I. 9511696 - LIF PAYMENTS TO NON-RESIDENT

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:

Application of ITCIA to RRIF payments to non-resident.

Position TAKEN:

Description of law and when it applies.

Reasons FOR POSITION TAKEN:

N/A

			May 10, 1995

	INTERNATIONAL TAX OFFICE	HEADQUARTERS
M. L. Quebec, Director	P. Spice
(613) 957-8953
	Attention:  Ms Janet Schermann
	              Non-Resident Withholding
	              Accounts Division         	951169

Life Income Fund Payments to Non-Resident

This is in reply to your facsimile transmission of April 26, 1995, and further to our telephone conversations of April 25, 1995 (Schermann/Spice) and May 4, 1995 (Schermann/Middleton). You asked us several questions concerning payments out of a Life Income Fund (LIF) to a non-resident and our comments follow.

1.If the rules set out in the definition of "periodic pension payment" in paragraph (c) of section 5 of the Income Tax Conventions Interpretation Act (ITCIA) apply to a registered retirement income fund (RRIF) when interpreting a particular tax convention, they apply equally to a RRIF which is a LIF.

Our reply:

The rules in the ITCIA respecting RRIF's also apply to a LIF which is a RRIF.

2.The term LIF is not defined in the Income Tax Act. Therefore it is possible that an investment referred to by a client as a LIF may not in fact be a RRIF and may not be subject to the rules in the ITCIA respecting RRIF's.

Our reply:

We agree. Note that a payment out of a LIF which is not a RRIF may be entitled to the withholding tax treatment accorded to a periodic pension payment under an income tax treaty if it is a pension payment and not excluded from the definition of a "periodic pension payment" in the ITCIA.

4.Since the maximum payout under such plans is set by each province, it may or may not be possible for a particular recipient to withdraw an amount large enough to be considered a lump sum amount by Revenue Canada. In other words, although the rules on periodic pension payments versus lump sum amounts apply to a LIF which is a RRIF, this in no way means that the recipient will be able to withdraw an amount in excess of a "periodic pension payment" from such a LIF. The recipient should be referred to the administrator of the plan or to the provincial pension plan authorities to find out how much can actually be withdrawn from their LIF.

Our reply:

We agree.

The Foreign Section of this directorate is usually responsible for issuing opinions and rulings on the topic of payments to non-residents and as Greg Middleton confirmed, some of the issues raised in your queries are currently under review and we are unable to provide our opinions on them. We trust the information we were able to provide is helpful.

for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch