20 January 1999 External T.I. 9900705 - WITHHOLDING - WOUND-UP RPP

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: Withholding tax - payments on the winding-up of a pension plan

Position: Withholding of tax is required

Reasons: Paragraph 153(1)(b), "superannuation or pension benefit" def'n in subsection 248(1) and subsection 103(4) of the Regulations

XXXXXXXXXX 								990070

Attention: XXXXXXXXXX

January 20, 1999

Dear Sirs:

We are writing in response to your letter of January 12, 1999, wherein you asked if any changes had occurred that would impact on the rulings provided in our letter of XXXXXXXXXX, 1997 (our file 970151). The issue relates to the withholding of income taxes on payments out of a pension plan that is to be wound-up.

Comments

As stated in ¶13 of Information Circular No. 70-6R3, Advance Income Tax Rulings, a ruling is only binding upon the Department for the time period specified in the ruling letter. Although we may confirm that a ruling is still binding upon the Department for specific periods beyond the time period provided for in the ruling letter, a request for such a time extension must be received prior to the expiration of the time limit specified in the ruling. As this is not the case with this ruling, we are unable to extend the time limit therein. Nonetheless, we are prepared to provide you with the following general comments which are not binding on the Department.

Paragraph 153(1)(b) of the Income Tax Act (the “Act”) requires that every person paying, in a taxation year, a “superannuation or pension benefit” withhold an amount in accordance with prescribed rules and remit that amount to the Receiver General on account of the payee’s tax for the year.

“Superannuation or pension benefit” is defined in subsection 248(1) of the Act. As defined, that term “includes any amount received out of or under a superannuation or pension fund or plan and, without restricting the generality of the foregoing, includes any payment made to a beneficiary under the fund or plan ... resulting from the termination of the fund or plan”.

The amount of tax to be withheld on lump sum payments is provided in subsection 103(4) of the Income Tax Regulations (the “Regulations”). A “lump sum payment” for this purpose is defined in subsection 103(6) of the Regulations and by virtue of paragraph (a) thereof would include a single payment out of a superannuation or pension fund or plan on the winding-up of the fund or plan. The (combined federal and provincial ) withholding tax rates for such lump sum payments are:

			* for payments not greater than $5,000		10%

			* for payments exceeding $5,000
			   and not greater than $15,000			20%

			and

			* for payments exceeding $15,000			30%.

We trust this information is of assistance.

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