23 January 1992 Income Tax Severed Letter 113

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.

Subject: WITHHOLDING TAX ON RRIF PAYMENTS UNDER CANADA-U.S. TREATY Section(s): ART XVIII of Canada-U.S. treaty]

• 5- 912626 M.P.Baldwin 957-8953

XXX

Attention: XXX

January 23, 1992

Dear Sirs:

Re: Withholding Tax as outlined by the Canada - U.S. Tax Convention

This is in reply to your letter of September 12, 1991 requesting confirmation of information relating to pension payments and the applicable withholding tax on these pension payments under the Canada-U.S. Tax Convention.

The position taken by the department in the past has been that where the arrangement between the RRIF carrier and the annuitant is such that the carrier is obligated to make equal payments to the annuitant at stated intervals of three or more, the payments would represent periodic pension payments for the purpose of the Canada-U.S. Tax Convention.

In December 1991, the Department of Finance issued draft Amendments to the Income Tax Conventions Interpretation Act which addressed the question of taxation of registered retirement income fund (“RRIF”) payments to a U.S. resident.

In the draft legislation the definition of pension will include payments arising in Canada out of a RRIF. It also states that a payment made after December 20, 1991 that is otherwise a periodic payment would not be a periodic payment and thus subject to the full 25% Part XIII tax where, subject to certain exceptions, the total of all payments made under the RRIF at or before that time of the payment and in the year exceeds the greater of

• (a) twice the amount that would be the minimum amount under the fund for the year, and
• (b) 10% of the amount that would be the fair market value of the property held in connection with the fund at the beginning of the year

if all property transferred in the year and before that time to the carrier of a fund as consideration under the fund had been transferred before the beginning of the year and the definition of “minimum amount” in paragraph 146.3(1)(b.1) of the Income Tax Act were applicable with respect to all RRIFs.

We trust the above comments will be of assistance to you.

Yours truly,

for Director
Financial Industries Division
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch