25 January 2012 External T.I. 2011-0416841E5 - Singapore Pension

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.

Principal Issues: Whether amounts withdrawn from the Singapore Central Provident Fund are taxable in Canada.

Position: No, provided the amount is a pension benefit.

Reasons: Canada-Singapore Income Tax Convention Article XVII provides that pensions and annuities arising in a contracting state are only taxable in that state, i.e., Singapore.

XXXXXXXXXX 

									2011-041684
									K.G. Weir
						

January 25, 2012

Dear XXXXXXXXXX :

Re: Pension from the Singapore Central Provident Fund

We are writing in response to your letter of August 12, 2011, concerning the appropriate reporting of your client's interest in the Singapore Central Provident Fund (CPF).

You advised that your client was a resident and citizen of Singapore prior to moving to Canada. During the time that your client resided in Singapore, they contributed up to 20% of their annual salary to the CPF. Your client is now entitled to withdraw their investment in the CPF.

Under section 3 of the Income Tax Act (ITA), residents of Canada are taxed on their worldwide income. Under subparagraph 56(1)(a)(i) of the ITA, any amount received by a taxpayer in the year as, on account or in lieu of payment of, or in satisfaction of, a superannuation or pension benefit is included in income whether it is in the nature of a single payment or otherwise. A superannuation or pension benefit includes any amount received out of a superannuation fund or plan. Generally, a plan will be considered a superannuation or pension fund or plan where contributions have been made to the plan by or on behalf of an employer or former employer of an employee in consideration for services rendered by the employee and the contributions are used to provide an annuity or other periodic payments on or after the employee's retirement in consideration for his or her employment services. Subparagraph 56(1)(a)(i) of the ITA applies to benefits from a foreign pension plan that are attributable to services rendered while the individual was not a resident of Canada. The determination of whether a specific payment from the CPF would constitute a superannuation or pension benefit for purposes of the ITA is a question of fact.

Under article XVII of the Convention between Canada and the Republic of Singapore (Convention), pensions and annuities arising in a Contracting State shall only be taxable in that State. Consequently, the Convention provides that a superannuation or pension benefit received from a Singapore plan will only be taxable in Singapore. For Canadian income tax purposes, the Canadian resident who receives a superannuation or pension benefit from Singapore would have to include the amount in their income under subparagraph 56(1)(a)(i) of the ITA but would be entitled to an offsetting deduction under subparagraph 110(1)(f)(i) of the ITA.

With respect to the reporting requirements, a Canadian resident is generally required to file Form T1135, Foreign Income Verification Statement, with their tax return if at any time in the year the total cost amount of all "specified foreign property" owned by the resident was more than $100,000. However, "specified foreign property" does not generally include an interest in a foreign pension plan or fund that: principally provides superannuation or pension benefits to non-resident beneficiaries; is maintained primarily for the benefit of non-residents and; is exempt from income tax in the tax jurisdiction where the plan or fund is resident.

We trust these comments will be of assistance.

Yours truly,

Nerill Thomas-Wilkinson
Manager
for Director
Reorganizations Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch