18 January 1996 Internal T.I. 9530017 - FOREIGN PENSION PLAN AS EBP

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: employer contribution to foreign pension

Position:likely ebp contribution

Reasons:not rca or sda

			January 18, 1996

	Laval Tax Services Office				Headquarters
D. Duff
	Attention: Marc Vachon					(613) 957-8953

										7-953001

XXXXXXXXXX

This is in reply to your Round Trip Memorandum dated November 15, 1995, and further to your telephone conversation with Mr. Wayne Harding of this office, regarding the Employer contributions to an Australian pension plan on behalf of the Employee. It is our understanding that the Employee arrived in Canada from Australia on XXXXXXXXXX to work for the Employer and will be returning to Australia in XXXXXXXXXX.

Although an exact determination of the nature of the payments cannot be made without a review of all of the relevant facts we have the following comments. An arrangement where an employee has a right to receive an amount after the end of the year may be a salary deferral arrangement ("SDA") if one of the main purposes for the existence of the right is to postpone taxes payable with respect to salary for services rendered. Although it is always a question of fact we typically do not consider rights under a pension plan to be an SDA.

Employer contributions to a non-registered pension plan would normally be contributions to a retirement compensation arrangement ("RCA") but paragraph (l) of the definition of RCA in subsection 248(1) of the Act generally exempts foreign pension plans. Also the arrangement will not be deemed to be an RCA by virtue of subsections 207.6(5) and (5.1) of the Act unless the employee is resident in Canada for at least 60 months which is not the case in this situation.

In our opinion the Employer contributions are most likely contributions to an employee benefit plan ("EBP"). As such the contributions would not be required to be included in the Employee's income when paid to the Australian pension plan and there would be no other tax consequences to the Employee at the time the contributions are made. Normally paragraph 18(1)(o) of the Act prohibits the employer from deducting the contributions to the EBP at the time the contribution is made, however, paragraph 18(10)(c) of the Act will allow the deductions in this case.

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