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 Sir:
Re: Disability Payments made to Non-Resident
This is in reply to your letter dated March 19, 1991 whereby you requested our opinion in respect of the following hypothetical fact situation:
Facts
If the taxpayer had remained resident in Canada, the payments in question would have been taxable under paragraph 6(1)(f).
The employer paid to disability insurance premium in full to a Canadian insurer.
All services to the employer during the course of the disability policy premium payments were rendered in Canada.
The taxpayer has become disabled and is being paid pursuant to the terms of the disability policy. The taxpayer is not providing services to the (nor former) employer.
The taxpayer is a resident of the United States and a non-resident of Canada throughout the year (departure was in a previous year).
The insurance carried making the payments is a Canadian corporation.
Our Position
In our opinion, the payments in question are subject to tax under the Canadian Income Tax Act (the "Act") by virtue of subparagraph 115(1)(a)(i) and subsection 2(3) thereof.
In order for income to be taxable under subparagraph 115(1)(a)(i) and subsection 2(3) of the Act, it is not necessary that the duties of employment in respect of which the income relates be performed in the year the income is received by the taxpayer.
By virtue of subparagraph 2(a) of Article XVIII of the Canada-United States Income Tax Convention, 1980, the tax that Canada may impose on the payments here in question will be limited to an amount not in excess of 15 percent of the gross amount of such payments provided the plan qualifies as a pension as defined in paragraph 3 of that Article.
As indicated in Paragraph 23 of Interpretation Bulletin IT-428, the law does not require that tax be withheld at source by the payor in respect of amounts of the kind here in question.
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© Her Majesty the Queen in Right of Canada, 1991
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© Sa Majesté la Reine du Chef du Canada, 1991
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