| 19(1) | File No. 5-8698 |
| D.S. Delorey | |
| (613) 957-3495 |
November 7, 1989
19(1)
This is further to your telephone conversation with the writer on September 25, 1989 and in reply to your letter of September 19 concerning your plan to again 19(1)
24(1)
With respect to the planned transfer of your pension plan funds to an RRSP, proposed legislation as released by the Department of Finance in March 1988 provides for a tax-free transfer to an RRSP of a lump sum amount from one plan to the other. In other words, under such proposed legislation, you cannot effect such a tax-free transfer if you first receive the funds from your pension plan. The legislation, if enacted as proposed, will apply to such lump-sum transfers in 1989.
Funds paid out of an RRSP to a non-resident of Canada are subject to a "Part XIII" tax of 25% pursuant to paragraph 212(1)(1) of the Act. Funds paid out of a registered retirement income fund (RRIF) to a non-resident of Canada are also subject to a "Part XIII" tax of 25% under paragraph 212(1)(q) of the Act. By virtue of Article 18 of the Canada-Australia Income Tax Convention (1980), this 25% rate will be reduced to 15% where the funds received out of an RRSP or RRIF are received in the form of an annuity. Since the work "annuity" is not defined in the Convention, Article 3 thereof states that an annuity sourced in Canada shall have the meaning it has under Canadian tax law. With respect to the word "annuity", subsection 248(1) of the Act states that
"'annuity' includes an amount payable on a periodic basis whether payable at intervals longer or shorter than a year and whether payable under a contract, will or trust or otherwise".
Although the above wording does not specifically define the word "annuity", it is probable that any amounts received out of an RRSP that are received on other than a periodic basis (e.g., a commutation of future annuity Canada-Australia Income Tax Convention (1980) and thus would be subject to a 25% rate of tax. With respect to amounts received out of an RRIF, it is probable that only the minimum payments required thereunder would, if they constitute periodic payments, qualify as annuity payments subject to the reduced 15% rate of tax. That is, any withdrawals from the RRIF in excess of the minimum required withdrawal (or any withdrawals of the required minimum that cannot be said to received on a periodic basis) will be subject to the full 25% rate of tax. Photocopies of Articles 3 and 18 of the Canada-Australia Income Tax Convention (1980) are enclosed for your perusal. With respect to the possibility of having to pay additional tax to the Australian government, we suggest that you contact the relevant Australian authorities.
We trust that the above comments will be of assistance.
Yours truly,
for DirectorFinancial Industries DivisionRulings Directorate