17 April 1996 External T.I. 9531215 - TRANSFER FROM FOREIGN PLAN TO RPP

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:

Whether deduction under 147.2(a) or(b) available in respect of employee amounts out of a foreign (EBP) pension plan transferred tax-free to RPP.

Position:

No deduction allowed.

Reasons:

Because amounts transferred are not brought into income of e/ee and therefore cannot be basis of deductible contributions to RPP.

			953121
XXXXXXXXXX			P. Spice

Attention: XXXXXXXXXX

April 17, 1996

Re: Transfer of Employee Contributions from Foreign Pension Plan to Registered Pension Plan

This is in reply to your letter of November 22, 1995, and further to our letters of September 20, 1995 (document #951890), and November 17, 1995 (document #952662). You ask whether an amount out of a foreign pension plan which is an "employee benefit plan" ("EBP") as defined in subsection 248(1) of the Income Tax Act may be transferred to a registered pension plan ("RPP") and a deduction taken by the employee with respect to that portion of the amount which represents a return of the employee's own contributions to the EBP. You suggest that the deduction could be taken under either paragraph 147.2(4)(a) or (b) of the Income Tax Act (the "Act") as a contribution to the RPP in respect of past service.

As indicated in our letter of September 20, 1995, the tax-deferred transfer from a foreign pension plan to an RPP is limited to the situation where the employee has no right to the amounts out of the foreign pension plan; in other words, the transfer is not being made at the employee's direction or request. In these circumstances, no income inclusion or deduction from income is possible under the Act. In order to benefit from the exclusion under subparagraph 6(1)(g)(ii) of the Act, the employee must be entitled to the amounts.

To summarize, where amounts are transferred from the EBP to the RPP in the manner described in our letter of September 20, 1995, the employee will forfeit the potential benefit of subparagraph 6(1)(g)(ii) of the Act and will become liable for tax on the full amount received out of the RPP under subparagraph 56(1)(a)(i) of the Act. This is so whether or not the employee was entitled to a deduction for the amounts originally contributed to the EBP.

We trust our comments will be of assistance to you.

Yours truly,

for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch