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.
August 10,1984
Mr. P. Pinkus Director Provincial and International Relations Division Revenue Canada Taxation 88 Metcalfe Street Ottawa, Ontario
Dear Mr.Pinkus:
Re: Canada- U.S. Income Tax Convention (1980) Article XXI
At the suggestion of Mr. J. M. Dery of the Department of Finance Tax Policy Division, I am writing to obtain a clarification and confirmation of provisions of the above treaty. The intent of Article XXI was that Canadian trusts created "to provide pension retirement or other employee benefits" would be exempt from tax on dividends and interest earned on investments in U.S. securities.
Shortly after the treaty was announced, I wrote to Mr. Dery explaining that most Canadian pension plans do not invest directly in U.S. securities. Usually a Canadian pension plan would buy units of a "Master Trust", a 'pooled fund' or 'segregated fund' which in turn would own the U.S. investments. These trusts are usually unit trust which are not tax exempt. However, these trusts are not taxed because all income is either paid out of the trusts or an enforceable right of payment is created.
According to Mr. Dery, paragraph 2 (b) of article XXI as amended by the first protocol was implemented to rectify this problem.
Mr. Dery suggested that I write to you for written confirmation that the XXXX would be exempt from U.S. non-resident withholding tax on dividends and interest payments received on its U.S. investments by virtue of the fact that:
1) it is a trust resident in Canada 2) it is not taxed in Canada 3) it is constituted and operated exclusively to earn income for the benefit of registered Canadian pension plans and Deferred Profit Sharing Plans.
In addition, could you confirm if it is the intent of the treaty that RRSPs are exempt from non-resident tax under the new treaty.
Thank you for your assistance.
Yours truly,
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