Introduction

The purpose of a Chapter History page is to highlight any amendments to the information contained in a chapter of an income tax folio, including amendments to the information originally contained in an interpretation bulletin that has been cancelled and replaced with a folio chapter. It outlines amendments that have been made as a result of legislative changes and proposed legislative changes, precedential court decisions, as well as new or revised interpretations of the Canada Revenue Agency (CRA).

Except as otherwise noted, all statutory references herein are references to provisions of the Income Tax Act, R.S.C., 1985, c.1 (5th Supp.), as amended and all references to a Regulation are to the Income Tax Regulations, C.R.C., c. 945, as amended.

Update May 21, 2024

¶3.11 is amended to add clarity. This change affects the English version only. The original wording may have seemed to suggest that it is subsection 104(1) that includes a civil law succession in the definition of estate. The revision makes it clear that this is accomplished by the wording of subsection 248(1).

Update February 8, 2024

General

Income Tax Folio S2-F1-C3, Pension Benefits, replaces and cancels Interpretation Bulletins IT-499R, Superannuation or Pension Benefits and IT-76R2, Exempt Portion of Pension when Employee has been a Non-resident.

In addition to consolidating the content of the former interpretation bulletins, general revisions have been made to improve readability. Any substantive technical and interpretive changes to the information outlined in the former interpretation bulletins are described below.

Legislative and other changes

Throughout the Chapter, all references to spouse are changed to spouse and common-law partner to reflect amendments to the Act (made by S.C. 2000, c. 12, applicable after 2000).

The expressions superannuation or pension benefit and superannuation or pension fund or plan are changed to pension benefit and pension plan in the interest of plain language.

¶3.2 to 3.6 are added to provide a general description of what constitutes a pension plan.

¶3.7 is added to provide a general description of what constitutes a pension benefit.

¶3.8 to 3.10 (formerly ¶1 and 2 of IT–499R) are updated to reflect:

• the exception from subparagraph 56(1)(a)(i) for CPP and QPP death benefits (made by S.C. 1998, c. 19, s. 9, applicable to the 1997 and subsequent tax years);
• the amendments to the Act to substitute the term specified pension plan for prescribed provincial pension plan (made by S.C. 2011, c. 24); and
• the introduction of clause 56(1)(a)(i)(C.1) for foreign retirement arrangements (made by S.C. 1994, c. 7, Sch. II, applicable to payments received after July 13, 1990).

¶3.11 (formerly included in ¶5, 12, and 13 of IT–499R) is amended to reflect the amendment of the definition of estate in subsection 248(1) to include “for civil law, a succession” (made by S.C. 2013, c.40, s.89, applicable effective December 12, 2013).

¶3.12 is added to reflect amendments to the Act that provide for CPP and QPP death benefits to be included in the income of the deceased’s estate, rather than the recipient’s income (made by S.C. 1998, c. 19, s. 9, applicable to the 1997 and subsequent tax years).

¶3.13 is added to make reference to income averaging treatment for retroactive lump sum payments of certain types of pension benefits afforded by the introduction of section 120.3 for CPP and QPP benefits (made by S.C. 1994, c.7, s.98, applicable to the 1990 and subsequent tax years) and section 120.31 for other pension benefits (made by S.C. 2000, c.19, s.30, applicable to the 1995 and subsequent tax years).

¶3.15 (formerly ¶3 of IT–499R) is updated:

• to reflect the introduction of PRPPs (made by S.C. 2012, c. 31, s. 36, applicable after December 13, 2012); and
• to eliminate the reference to the exclusion from income under section 57 for amounts exempt under the Income Tax War Act, as the exclusion has limited application due to the passing of time.

¶3.16 is added to clarify that the income tax treatment of a pension plan that is considered an SDA is determined under the SDA rules, not paragraph 56(1)(a).

¶3.17 is added to provide general information on the following amounts that are not included in income under any provision of the Act:

• returns of RPP contributions due to a reasonable error or to avoid revocation (made by S.C. 2013, c. 40, s. 25, applicable to contributions made after 2013);
• certain transfers from an RPP or PRPP;
• annuity acquisitions from an RPP; and
• pensions that are expressly exempt from tax.

¶3.18 (formerly ¶1 of IT–76R2) is expanded to provide additional general information on the withholding tax applicable to pension benefits paid to non-residents.

¶3.19 and 3.22 (formerly ¶2 of IT–76R2), which deal with the exception in the post-amble of paragraph 212(1)(h), are revised:

• to reflect the CRA’s views on the meaning of the phrase only occasionally employed in Canada, in light of the decision in Nanne v The Queen, [2000] 1 CTC 2776, 54 DTC 1653; and
• to provide an example.

¶3.21 (formerly ¶3 of IT–76R2) is revised to replace the two allocation formulas with a single formula that more accurately reflects the requirements of the post-amble of paragraph 212(1)(h).

¶3.23 is added to provide general information on the election in section 217.

¶3.24 is added to provide general information on reporting and withholding requirements for pension benefits.

¶3.26 to 3.31 are added to provide general information on SDAs, as well as to provide the CRA’s views on whether a pension plan constitutes an SDA.

¶3.32 and 3.33 are added to provide general information on RCAs.

¶3.34 and 3.36 are added to provide additional general information on EBPs.

¶3.37 to 3.39 (formerly included in ¶5 of IT–499R) are expanded to provide general information about death benefits.

¶3.40 to 3.42, 3.45, and 3.46 (formerly included in ¶9 of IT‑499R) are expanded to provide additional information about foreign pension plans and foreign retirement plans.

¶3.43 and 3.44 (formerly included in the Note to ¶3 of IT‑499R) are expanded to provide additional information about foreign retirement arrangements and to reflect the enactment of clause 56(1)(a)(i)(C.1) (made by S.C. 1994, c. 7, Sch. II, applicable to payments received after July 13, 1990).

¶3.47 is added to provide the CRA’s views on when a taxpayer may be considered to have constructively received an amount from a pension plan.

¶3.48 is added to provide general information about the attribution rules in subsections 56(2) and (4).

¶3.49 is added to provide general information about the rollover rules for transfers from an RPP, PRPP, or foreign pension plan to another RPP or PRPP or to an RRSP or RRIF.

A Proposed legislative change notice has also been added to ¶3.49 to reflect a proposal announced by the Department of Finance in Bill C-59. The legislative change may apply when a taxpayer transfers an amount from an unregistered pension plan to their RRIF. If passed, the proposed amendment will be deemed to come into force on August 4, 2023.

¶3.50 to 3.52 are added to provide the CRA’s views on the income tax consequences of transfers from a foreign pension plan to another foreign pension plan or to a foreign retirement plan.

¶3.56 is added to provide general information about transfers from an RPP or PRPP on breakdown of marriage or common-law partnership.

¶3.57 and 3.58 (formerly ¶7 and 8 of IT–499R) are revised to reflect the replacement of the annuity acquisition rule for pension plans in section 254 with a more narrow annuity acquisition rule for RPPs in section 147.4 (made by S.C. 1998, c. 19, s. 176, generally applicable after 1996) and a similar rule for PRPPs in subsections 147.5(21) to (23) (made by S.C. 2012, c. 31, s. 36, applicable after December 13, 2012).

¶3.59 is added to provide general information about the pension income amount.

¶3.60 is added to provide general information about the pension income splitting rules (made by S.C. 2007, c. 29, s. 5, applicable to the 2007 and subsequent tax years).