20 March 1998 External T.I. 9635215 - rrsp rrif paid to non-resident-netherlands

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: What is the tax rate on RRIF payments made to residents of the Netherlands.

Position:	The tax rate on lump-sum RRIF payments is 25%.
		The tax rate on RRIF payments that are periodic pension payments is 15%.

Reasons: The tax rates are based on paragraph 212(1)(q) of the Act, section 5 of the Income Tax Conventions Interpretation Act and Article 18 of the Canada-Netherlands Income Tax Convention.

XXXXXXXXXX 						963521
G. Middleton
Attention:  XXXXXXXXXX 				(613) 957-2122

March 20, 1998

Dear Sirs:

This is in reply to your fax of October 22, 1996 and further to our telephone conversation of October 29, 1996 concerning the rate of withholding tax on a lump-sum settlement payment out of a Registered Retirement Income Fund (“RRIF”) paid by a Canadian resident to a resident of the Netherlands.

For the purposes of the following discussion, we have assumed that the lump-sum settlement payment under a RRIF is not “periodic pension payment” as defined in section 5 of the Income Tax Conventions Interpretation Act (the “ITCIA”), in particular paragraph (c) of the definition. Under Article 18 of the Canada-Netherlands Income Tax Convention (the “Netherlands Convention”), as amended by the Protocol which was signed on March 4, 1993 and entered into force on July 30, 1994, all RRIF payments are considered to be pensions; not annuities. The lump-sum RRIF payment is subject to tax at the rate of 25% in accordance with paragraph 212(1)(q) of the Income Tax Act and paragraph 1 of Article 18 of the Netherlands Convention allows Canada to tax such a pension payment.

On the other hand, where a particular RRIF payment made to a resident of the Netherlands is a “periodic pension payment” as defined in section 5 of the ITCIA, such a RRIF payment would be subject to tax at the reduced rate of 15% pursuant to paragraph 2 of Article 18 of the Netherlands Convention. The reduced 15% rate of tax in paragraph 2 of Article 18 applies only to RRIF payments which are periodic pension payments; the reduced rate does not apply to the lump-sum RRIF settlement payment mentioned above.

We trust the above comments will be of assistance to you.

Yours truly,

for Director
Reorganization and International Division
Income Tax Rulings and Interpretations Directorate
Policy and Legislation Branch