4 November 1980 Income Tax Severed Letter RRRR27 - Non-resident withholding tax — transfer from RPP or DPSP to another RPP, RRSP,or to purchase IAAC when member is non-resident of Canada

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.

Dear Sirs:

This is in response to your letter of October 3 concerning the appropriateness of Part XIII withholding tax when amounts are transferred from an R.P.P. or a D.P.S.P. to another R.P.P., an R.R.S.P. or to purchase an I.A.A.C. when the member of these plans is a non-resident of Canada.

You cite a 1980 tax case at the Federal Court - Trial Division level, namely Forest et al. (Trustee) v. The Queen, 1980 D.T.C. 6149. The decision in this case is being accepted by the Department as a precedent ... that a non-resident of Canada may arrange for the direct transfer of entitlements under an R.P.P. to an R.R.S.P. in Canada and not be subject to withholding tax pursuant to paragraph 212(1)(b). The R.P.P. involved must clearly provide for such a transfer in its indenture. We point out that the effect of this case leaves the resident and the non-resident on an equal footing but the reason for no withholding on the non-resident is that there was no payment made as contemplated by paragraph 212(1)(h).

We are of the view that a direct transfer may be made by a non-resident from one R.P.P. to another R.P.P. in Canada without attracting Part XIII tax provided the registered plan provides for such a transfer.

However, we are of the opinion that a similar treatment cannot be extended to amounts transferred by non-residents of Canada from a D.P.S.P. because of the provisions of paragraph 214(3)(d). This provision deems the amount "to be an amount paid to the taxpayer" for the purposes of subsection 212(1) withholding. Accordingly, a direct transfer of D.P.S.P. entitlements by a non-resident will trigger Part XIII withholding tax in accordance with paragraph 212(1)(m).

Additionally, we are of the view that a direct transfer from an R.P.P. or a D.P.S.P. in Canada to a vendor for the purchase of an I.A.A.C. is not capable of being executed without attracting Part XIII tax.

We are of the view that an I.A.A.C. is an ordinary annuity meeting certain conditions and for which a deduction under section 61 has been made. In the case of a non-resident of Canada, no deduction can be made in accordance with section 61.