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.
Principal Issues:
Is an RCA a "pension" for purposes of the Canada-U.S. Treaty?
Position:
Yes. XXXXXXXXXX
Reasons:
Protocol has expanded meaning of "pension" to include "other retirement arrangements".
XXXXXXXXXX
DRAFT
Tax Executives Institute
December 6, 1995
QUESTION 17 - CANADA - US TAX TREATY - PENSIONS
In view of the recent ratification of the 1995 Protocol to the Canada - U.S. Income Tax Convention (the "Convention"), many TEI members are considering how payments from a retirement compensation arrangement ("RCA") to residents of the United States will be treated for withholding tax purposes. In particular, under the expanded definition of "pensions" set forth in paragraph 3 of Article XVIII, an RCA appears to be an "other retirement arrangement". Would Revenue Canada confirm that an RCA is a pension for purposes of withholding under the Canada - U.S. Income Tax Convention?
Department's Position
Payments from an RCA, as that term is defined in subsection 248(1) of the Income Tax Act, would qualify as "pensions" for purposes of the Convention. However, whether payments made from an RCA to a resident of the United States will be eligible to the reduced rate of 15% will depend on whether the payments qualify as "periodic pension payments". In this regard, since that term is not defined in the Convention, reference should be made to the definition of "periodic pension payment" in section 5 of the Income Tax Conventions Interpretations Act. For example, a payment from an RCA would not constitute a "periodic pension payment" where the "payment is not one of a series of annual or more frequent payments to be made over the lifetime of the recipient or over a period of at least 10 years".
Author: Jim Wilson
File: 953051
Date: November , 1995