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.
This is in reply to your letter of January 16 concerning paragraph 212(1)(h) of the Income Tax Act and Article XVIII of the Canada-Switzerland Income Tax Convention (Convention).
You describe a situation whereby a non-resident was employed by a Canadian resident at the latter's branch office in Switzerland for 20(taxation) years. He rendered services on 240 days of each year, reporting for work at the Swiss office on 237 of these days and spending the other 3 at his employer's annual conference held in Canada during the last week of December. Each year, he contributed to the registered pension plan (RPP) set up by his employer in respect of all services rendered by him in the year.
In our opinion, any payment from the RPP would be subject to Canadian withholding tax on the full amount thereof since the non-resident was employed in Canada in each year contributions were made to the plan. The term "employed in Canada" used in paragraph 212(1)(h) has the same meaning as that term in paragraph 2(3)(a). In order for a non-resident employee to be subject to Canadian tax under subparagraph 115(1)(a)(i) as in the non-resident in the situation you described he would have to be a person who was employed in Canada as set out in paragraph 2(3)(a). We cannot agree that the opening words of Article XVIII of the Convention could have any other meaning than a payment from a Canadian source to a resident of Switzerland in the situation you have described.
On the basis of the above, we would not entertain the issuance of rulings to the effect that Canadian withholding tax would be imposed only on the portion of a payment out of a RPP attributable to services rendered in Canada by an individual who was at all times a non-resident.
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