17 August 1989 Income Tax Severed Letter AC58301 - Non-resident Withholding Tax on 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.

5-8301
                                              R.B.Day
                                              (613) 957 2136

We are writing in reply to your letter of June 15, 1989, wherein you requested that we reconsider the position set out in our letter of March 7, 1989, namely that the taxpayer is subject to withholding tax on his Canadian pension income pursuant to paragraph 212(1)(h) of the Income Tax Act (Canada).

Our Comments

We have reviewed the additional information set out in your letter and are of the view that, on balance, that information supports our previous view that the taxpayer had not severed his ties with Canada during the period in question and that his pension income is subject to withholding tax under paragraph 212(1)(h).

Interpretation Bulletin IT-221 (copy attached), which applies to taxpayers who left Canada prior to May 26, 1980, states that all relevant factors have to be considered in determining a taxpayer's resident status. With respect to establishing whether or not his resident ties had been maintained or severed, paragraph `2 of the bulletin makes the following comments regarding a taxpayer's dwelling:

"If ... he disposed bona fide of his right to occupy his dwelling here, either by sale or by lease for a time at least equal to the greater of six months and the time of the expected absence from Canada, he would ordinarily be considered to have become a non-resident."

Interpretation Bulletin IT-76R2 (copy attached) sets out the Department's position regarding taxpayers claiming exempt status for a portion of their pension income. Paragraph 5 thereof states that

"Where a payee claims that a portion of a pension payment is exempt from non-resident tax, the payer must obtain satisfactory evidence that the employee, in respect of whom the payment is made, was neither a resident in Canada nor employed (other than occasionally) in Canada at any time in any taxation year' to which that portion of the payment can reasonably be attributed."

Since some of the issues raised in your letter relate to information we obtained from, 24(1) you may wish to correspond directly with them in order to establish the specifics of the taxpayer's situation.

      Assuming that you are able to obtain the relevant
      information the application of the law to the specific
      facts of the case would be made, in the first instance,
      by one of our District Taxation Offices.  Accordingly we
      would suggest that you approach our Mississauga District
      Taxation Office for a determination of the taxpayer's
      resident status.  Specifically we suggest that you write
      to 
                   Mr. J.M. Farrell
                   Chief of Verifications & Collections
                   Revenue Canada, Taxation
                   Mississauga District Taxation Office
                   P.O. Box 6000
                   Mississauga, Ontario
                   L5A 4E9
                   Canada

To further assist you in this regard, we are enclosing a copy of a questionnaire which, although it is composed with the prospective emigrant in mind, will give you some guidance as to the type of information the Mississauga District Taxation Office will require to establish whether or not the taxpayer was a Canadian resident

We hope the above comments and enclosures will be of assistance to you.

Yours truly,

for Director Small Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch