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.
ICAA/Revenue Canada Roundtable
QUESTION #8
Question #8
Would a retiring allowance received by a new resident of Canada, be included in income under section 56(1)(a)(ii) of the ITA (or any other section of the ITA) if the underlying services performed did not relate to services performed in Canada? For example, a U.S. citizen works and resides in the U.S. His U.S. employer terminates his employment and pays him a retiring allowance. The retiring allowance is based on the number of years service performed in the U.S. Before receiving the retiring allowance, the U.S. citizen moves to Canada and receives the retiring allowance while resident in Canada. If the retiring allowance is included in income for Canadian tax purposes, it would appear that he would also be entitled to transfer the retiring allowance into an RRSP pursuant to the limitations under section (j.1) of the ITA. It would appear that even though his employer is a U.S. company and the services were performed outside Canada, a rollover into an RRSP would, subject to the section (j.1) limitations, be available. Any comments?
Answer
A retiring allowance received by a Canadian resident, calculated based on years of service rendered outside Canada while the individual was a non-resident, is included in income under subparagraph 56(1)(a)(ii) of the Income Tax Act. Any retiring allowance paid by an employer and included in income under subparagraph 56(1)(a)(ii) can be rolled into an RRSP pursuant to subsection 60(j.1), subject to the limitations therein. Years of service as an employee is the relevant limiting test in subsection 60(j.1), not years of residency.
Prepared by
Philipe-A. Sarrazin
Deferred Income Plans Section
957-8984
June 26, 1998
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