While the taxpayer was a resident in the United Arab Emirates, the taxpayer’s employer established on behalf of the taxpayer an independent trust in the Isle of Man (the “provident fund” or “PF”) to which the taxpayer and employer made contributions, and the benefits under which are attributable to services rendered by the taxpayer while a non-resident. The taxpayer will begin withdrawing funds from the PF and is described as a resident of Canada. After referring to the employee benefit plan (“EBP”) definition in s. 248(1), CRA noted:
- Generally, a plan will be considered to be a pension plan (irrespective of whether it is registered under the Act) “where contributions have been made to the plan by or on behalf of an employer or former employer of an employee in consideration for services rendered by the employee and the contributions are used to provide an annuity or other periodic payment on or after the employee’s retirement.”
- “A foreign pension plan would generally fall within the EBP definition, but a foreign EBP does not necessarily fall within the meaning of a pension plan.”
- If the PF is an EBP, the amounts received therefrom would be taxable under s. 6(1)(g), subject to certain exceptions including that in 6(1)(g)(iii) regarding pension benefits received out of the plan that are attributable to services rendered by a person in a period throughout which the person was not resident in Canada – in which event, they would be fully taxable under s. 56(1)(a)(i) “even if the employee’s contributions to the pension plan were not deductible under the Act and even if the pension benefits are tax-free in whole or in part in a foreign jurisdiction.”
- Where the amount received out of the PF is a lump sum amount that is taxable under s. 56(1)(a)(i), a deduction may be permitted under s. 60(j) for a transfer to an RRSP or registered pension plan.