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.
962026
XXXXXXXXXX Jim Wilson
Attention: XXXXXXXXXX
June 11, 1996
Dear Sirs:
Re: Payments from a Life Income Fund to a Non-Resident
This is in reply to your letter dated May 31, 1996 in which you requested confirmation of the rate of withholding tax applicable to a non-resident of Canada on payments made from a Life Income Fund.
The term Life Income Fund ("LIF") is not defined under the Income Tax Act ("Act"). Instead, the terms of a LIF are provided for under provincial legislation. However, our understanding is that the provinces generally try to insure that a LIF qualifies for registration as a Registered Retirement Income Fund ("RRIF") as that term is defined in subsection 146.3(1) of the Act. A LIF has additional requirements imposed on it by the relevant provincial pensions benefits legislation, such as locking-in requirements. We also understand that a LIF has two stages. The first stage consists of funds being transferred from a locked-in Registered Retirement Savings Plan to a RRIF where the funds are held until the annuitant reaches age 80. At that point the second stage occurs consisting of the funds being transferred to a life annuity.
Where the LIF is a RRIF, payments to a non-resident of Canada would be subject to Part XIII tax in accordance with paragraph 212(1)(q) of the Act. Where the non-resident is a resident of a treaty country, the 25% Part XIII tax may be reduced pursuant to that particular income tax convention.
The application of Canada's income tax conventions with respect to payments received from a RRIF is currently under review by the Department. We note that in a separate letter dated May 31, 1996 (file #962025), you have inquired into the appropriate withholding rates with respect to payments made from a RRIF to residents of the United Kingdom, Germany and Mexico. Once our review of this issue is finalized, we will be writing to you in response to that letter.
These comments are provided in accordance with the guidelines set out in paragraph 21 of Information Circular 70-6R2.
We trust you will find the above comments of some assistance.
Yours truly,
for Director
Reorganizations and International Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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