20 March 1991 Internal T.I. 903209 F - U.S. Excess Retirement Distributions Excise Tax

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.

Dear sirs:

Re:  U.S. Excess Retirement Distributions Excise Tax ("ERDET")

This is in response to your letter dated November 2, 1990, wherein you  requested our interpretation whether U.S. ERDET paid by a Canadian resident on U.S. source retirement distributions would qualify as a "non-business income tax" as defined in paragraph 126(7)(c) of the Income Tax Act (the "Act").

It is our understanding that the U.S. ERDET is an excise tax on individuals equal to 15% of the aggregate distributions from qualified pension plans to the extent that such distributions exceed the greater of U.S. $150,000 and an indexed dollar amount.

A review of the U.S. ERDET indicates that such tax is not based on the income of the individual and could in some situations be imposed even where the taxpayer has not reported any income for income tax purposes.  Since the U.S. ERDET is not in the nature of an income or profits tax, it would not qualify as a non-business income tax as defined in paragraph 126(7)(c) of the Act.

Since paragraph 2(a) of Article XXIV of the Canada-U.S. Income Tax Convention (the "Convention") is subject to the provisions of the law of Canada, the U.S. ERDET would also not qualify as an income tax paid to the United states for purposes of the Convention.

We trust the above is the information you require.

Yours truly,

for DirectorReorganizations and Non-Resident DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch