15 July 1996 External T.I. 9617645 - DEREGISTERED RPP TRANSFER TO FOREIGN 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.

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:

Effect of 6804 election on Trustee

Position:

Discussed provisions in general terms.

Reasons:

General discussion of law all that could be provided.

XXXXXXXXXX							5-961764

Attention: XXXXXXXXXX

July 15, 1996

Dear Sirs:

Re: XXXXXXXXXX

This is in reply to your letter of May 8, 1996, wherein you asked us to confirm that XXXXXXXXXX can remain Trustee of the above noted plan. You also asked us to provide information on what documentation, forms and procedures may be required for you to properly administer the plan.

To our knowledge, XXXXXXXXXX has not been authorized by the parties noted in your letter, to discuss the income tax matters relating to them. Therefore, we are unable to provide you with any specific comments that may pertain to your particular situation. However, we can provide you with the following general information that you may find of assistance.

Section 6804 of the Income Tax Regulations (the "Regulations") is presently in draft form. Nevertheless, Revenue Canada is prepared to administer the Income Tax Act (the "Act") and Regulations as if the provision were passed, provided that if the proposals are amended, or if the legislation is not, in fact, passed, adjustments to tax returns would be required.

Section 6804 of the Regulations does not deal with the termination of registered pension plans ("RPPs") or their conversion to foreign plans. The Regulation provides a means by which certain employers may elect to report Pension Adjustments ("PAs") in respect of their Canadian resident employees rather than treat contributions made to a foreign pension plan on behalf of these employees as contributions to a Retirement Compensation Arrangement (an "RCA"). In some cases where a foreign employer's employees are members of an RPP, the RPP could be terminated and the funds transferred to another fund which would be an RCA. In that case an election under section 6804 of the Regulations could be made.

In order for an employer to make an election under section 6804 of the Regulations in respect of a particular year after 1994, several conditions must be met. One of these is that the contributions must be made to a "qualifying entity" as defined in the Regulation. A "qualifying entity" is:

"a non-resident trust, corporation or other entity that

(a)is resident in a country under the laws of which an income tax is imposed,

(b)is exempt under the laws referred to in paragraph (a) from the payment of income taxes to the government of the country of which it is a resident, and

(c)was established or incorporated principally in connection with, or the principal purpose of which is to administer or provide benefits under, one or more superannuation, pension or retirement funds or plans or any funds or plans established to provide employee benefits."

In this regard we have previously expressed the opinion that a non resident trust, corporation or other entity would be a qualifying entity where a Canadian trustee acted as its agent in administering funds of the trustee.

With respect to reporting requirements, subsection 207.6(5) of the Act deems a "resident's arrangement" to be an RCA and defines a "resident's arrangement" as basically being that portion of a plan that comprises any "resident's contributions" made under the plan plus any property derived therefrom. Subsection 207.6(5.1) of the Act then defines what a "resident's contribution" is and specifically excludes contributions that are prescribed in accordance with section 6804. Accordingly a plan will not be an RCA if all contributions made under it in respect of Canadian resident employees are prescribed and refundable RCA tax will not apply to them. However, Part LXXXIV of the Regulations requires an employer to calculate and report PAs with respect to pension credits for its employees and, by virtue of paragraph 8301(1)(b) of the Regulations, this includes pension credits under foreign plans. Therefore, if you are acting as an agent for the employer you may be obliged to fulfil these requirements in accordance with any agreements you have entered into. However, this would be a matter you would have to resolve with the employer and trustee.

For more information on RCAs and the calculation of PAs in general, you should obtain the current versions of the "Retirement Compensation Arrangement Guide", the "Employers' Pension Adjustment Calculation Guide" and the "Plan Administrators Past Service Pension Adjustment Guide" from your local Tax Services Office. For additional information on calculating PAs and information on calculating PAs for foreign plans you may write to:

Registered Plans Division
Revenue Canada - Customs, Excise and Taxation
400 Cumberland Street
Ottawa, Ontario
K1A 0L8

or phone 1-800-267-3100.

The above comments are based on our understanding of the law as it applies in general and may or may not apply to the circumstances of a particular case. They do not form an advance income tax ruling and they are not binding on the Department.

Yours truly,

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