30 August 1994 External T.I. 9417105 - RRSP PAYMENT TO NON-RESIDENT

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:

RRSP payment to a non-resident.

Position TAKEN:

Subject to withholding tax under 212(1)(l).

Reasons FOR POSITION TAKEN:

Routine (see also 5-9526, 5-912939, 5-6094).

XXXXXXXXXX 941710

Attention:XXXXXXXXXX

August 30, 1994

Dear Sirs:

This is in reply to your letter of May 24, 1994 concerning the transfer of the monies in a Registered Retirement Savings Plan ("RRSP") to an Australian Superannuation Program.

The Income Tax Act (Canada) (the "Act") does not prohibit the withdrawal of funds from an RRSP. However, the Act does not allow for a tax-free rollover of funds under a RRSP to similar plans in a country other than Canada. Where a non-resident withdraws funds out of her RRSP, the withdrawal is subject to withholding tax of 25% under paragraph 212(1)(l) of the Act. The responsibility for withholding the tax and remitting it to Revenue Canada is on the Canadian resident (that is, in the case at hand the financial institution) paying or crediting the amounts to the non-resident. The party paying the amounts to the non-resident is also required to complete the appropriate information forms. We would note that no part of a payment out of an RRSP is considered a return of capital; thus, the whole payment is subject to withholding tax.

Where annuity payments are received out of an RRSP by a person resident in Australia, the 25% withholding tax is reduced to 15% by virtue of Article XVIII of the Canada-Australia Income Tax Convention Act, 1980. However, this reduced rate would not apply to a lump sum amount received by the Australian resident. (Note that, although the current rate on such lump sum payments is 25%, the rate is presently being reviewed.)

As your client may be able to file a section 217 election, we have enclosed a copy of the booklet "Residents of Other Countries" (see pages 12 and 13). In certain circumstances, this election may result in a reduction or refund of withholding tax for non-residents of Canada.

As noted above, the Act does not prohibit the payment of either lump sum amounts or periodic payments out of an unmatured RRSP. However, an RRSP may be "locked-in" under pension standards legislation and that legislation will require that the RRSP be held to provide a periodic pension income to the annuitant after reaching a certain age. This requirement is not imposed by the Act. You may wish to check the RRSP contract to determine if a locking-in agreement is attached.

The foregoing comments are an expression of opinion and are not binding on the Department. We trust, however, that they are helpful.

Yours truly,

for Director
Financial Industries Division
Rulings Directorate
Policy and Legislation Branch

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