| 5-910507 |
Dear Sirs:
Re: Request for Technical Interpretation
We are writing in reply to your letter of February 14, 1991, in which you request an interpretation of several Income Tax Act (the "Act") provisions as they apply to a specific hypothetical situation. The situation involves a Canadian employer's contributions to a French government pension plan (the "Plan") on behalf of a French expatriate employee during the period from the employee's arrival in Canada through his first five years of residence in Canada. The employee was a contributor to the Plan prior to his arrival in Canada.
In the fact situation you describe pertains to an actual client, we suggest you request an advance income tax ruling in accordance with the requirements of Information Circular 70-6R2. A ruling, will provide the Department's binding position respecting such a specific series of elements. If the situation relates to past events, you should obtain advice from the District Taxation Office. Otherwise, we are only able to offer the following general comments.
A foreign pension plan to which an employer makes contributions for services rendered by an employee is considered an employee benefit plan and not a retirement compensation plan where:
1) the employee was a member of the foreign plan before becoming a Canadian resident, and
2) the services were rendered during the first 60 months following the establishment of Canadian residence by the employee.
(Definitions of "retirement compensation arrangement" paragraph I.,s.248(1) and "employee benefit plan" s.248(1).)
During the first 36 months an employer's contributions to such an employee benefit plan would be deductible under paragraph 18(10)(b) and in the next 24 months they would not be deductible because of paragraph 18(1)(o). After 60 months of residence by the employee, subsection 207.6(5) would apply as you suggest. The value of benefits to the employee under an employee benefit plan and a retirement compensation arrangement are not included in the employee's income by virtue of subparagraph 6(1)(a)(ii).
The Department may not adopt an administrative position which would be contrary to the intent of the provisions noted above.
You also ask whether there would be included in the employee's income the portion of the employee's contribution to the plan paid by the employer. In our view such an amount would be considered income from employment and included by virtue of subsection 56(2) of the Act.
We trust the foregoing comments are of assistance.
Yours truly,
for DirectorFinancial Industries DivisionRulings Directorate