5 June 1998 Internal T.I. 9808866 - JAPANESE PENSION INCOME

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:

Are the amounts under appeal taxable?

Position:

Insufficient information has been provided on which we could make a determination. Various taxation scenarios were outlined.

Reasons:

The details provided were very brief and did not provide the necessary information.

            June 5, 1998

      Headquarters      Headquarters
      Appeals Branch    W.C. Harding
      Appeals & Referrals Division    (613) 957-8953
      Loraine Tremblay
      Director

      Attention: Peter Bush   980886

XXXXXXXXXX
Japanese Disability Pension Payments

This is in reply to your memorandum of April 6,1998, in which you asked us if certain amounts received by the above-noted individual are taxable in Canada.

We have reviewed the information provided to us and that which is available to us in our files. Based on this information we cannot advise whether or not the amounts in question are taxable. To do so we would require more information on the nature of the income sources, how these came to exist and why the amounts became payable. The following general comments may be of assistance to you in obtaining this information.

XXXXXXXXXX

Item 2 of the Notice of Objection has no basis under Canadian domestic law or under the Canada - Japan Income Tax Treaty. In general, it appears that all of these payments could be treated as taxable or non taxable receipts under Canadian domestic law in a number of ways. For example:

• If any of the amounts represent benefits from a disability or accident insurance contract acquired personally by XXXXXXXXXX, the amounts would generally not be taxable. However, where amounts are paid in the form of an annuity they may be taxable under the provisions of 56(1)(d) or 12.2 of the Act. We can not advise whether the amounts being paid are annuity payments as that term is used in the Act.
• If any amount is payable under arrangements commonly referred to as structured settlements they are non-taxable as discussed in Interpretation Bulletin IT365R2.
• If the amounts are paid under a sickness, accident, disability or income maintenance plan to which an employer of XXXXXXXXXX contributed, the amounts would be taxable in accordance with 6(1)(f) of the Act.
• If the amounts are paid under an employer pension plan or are a form of social security they are generally taxable in Canada under subsection 56(1)(a)(i) of the Act.
• Payments described as social assistance payments are taxable under 56(1)(u).

The provisions of paragraph 110(1)(f) could also have application to allow a deduction of any social assistance payments included in net income by virtue of clause 56(1)(a)(i)(A) or paragraph 56(1)(u) where they are paid on the basis of a means needs or income test.

Paragraph 110(1)(f) will also allow a deduction for any of the amounts that must be reported as net income if an exemption from Canadian taxation is provided in the Canada Japan Income Tax Treaty. However, based on the information provided there does not appear to be any exemption in the treaty for the amounts.

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