| 24(1) | 901534 |
| M.P. Sarazin | |
| (613) 957-2125 |
October 17, 1990
Dear Sirs:
We are writing in response to your letter dated July 6, 1990 wherein you requested a technical interpretation of the application of subsection 60(j.1) of the Income Tax Act (Canada) (the "Act") in the following situation.
Facts
1. Opco is a Canadian corporation. Opco is under an obligation to pay its employees retiring allowances in certain circumstances in consideration of long-term services rendered to the company.
2. Opco does not offer its employees membership in either a registered pension plan or a deferred profit sharing plan. Certain employees of Opco are, however, eligible to obtain benefits under Opco's parent company's pension plan. This parent company is a non-resident of Canada, and offers a pension scheme for its expatriate employees posted worldwide. This pension scheme is neither a registered pension fund nor a registered deferred profit sharing plan for purposes of the Act.
You have requested our opinion regarding the amount of retiring allowance eligible for transfer to a registered pension plan or registered retirement savings plan pursuant to clause 60(j.1)(ii)(B) of the Act. Pursuant to clause 60(j.1)(ii)(B) where "employer contributions under either a pension plan or deferred profit sharing plan of the employer or a person related to the employer had vested in the retire at the time of payment", the additional transfer of $1,500 per year provided in that clause is not available. You have noted that the Explanatory Notes to a Bill Amending the Income Tax Act (the "Explanatory Notes") issued by the Department of Finance in December 1982 indicate that the section was only intended to apply with respect to registered pension plans or deferred profit sharing plans and you believe that the interpretation of clause 60(j.1)(ii)(B) of the Act to include non-registered pension plans would not be in accordance with the legislative purpose of the paragraph.
Notwithstanding the comments in the Explanatory Notes, it is our view that the term "pension plan" as used in clause 60(j.1)(ii)(B) of the Act must be interpreted as including any pension plan and cannot be restricted to "registered pension plans" within the meaning of subsection 248(1) of the Act. The legislation, even though it differs from the stated legislative purpose of the paragraph, is very specific and our Department is responsible for the administration of the legislation enacted by Parliament. If you believe that the current legislation should be amended to reflect the stated legislative purpose of the paragraph then your concerns should be directed to the Department of Finance since they are responsible for the drafting of amendments to current legislation.
We regret that our response could not be more favourable.
Yours truly,
for DirectorReorganizations and Non-Resident DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch