903209
O. Laurikainen
(613) 957-2129
24(1)19(1)March 20, 1991
Dear sirs:
Re: U.S. Excess Retirement Distributions Excise Tax ("ERDET")
This is in response to your letter dated November 2, 1990, wherein you requested our interpretation whether U.S. ERDET paid by a Canadian resident on U.S. source retirement distributions would qualify as a "non-business income tax" as defined in paragraph 126(7)(c) of the Income Tax Act (the "Act").
It is our understanding that the U.S. ERDET is an excise tax on individuals equal to 15% of the aggregate distributions from qualified pension plans to the extent that such distributions exceed the greater of U.S. $150,000 and an indexed dollar amount.
A review of the U.S. ERDET indicates that such tax is not based on the income of the individual and could in some situations be imposed even where the taxpayer has not reported any income for income tax purposes. Since the U.S. ERDET is not in the nature of an income or profits tax, it would not qualify as a non-business income tax as defined in paragraph 126(7)(c) of the Act.
Since paragraph 2(a) of Article XXIV of the Canada-U.S. Income Tax Convention (the "Convention") is subject to the provisions of the law of Canada, the U.S. ERDET would also not qualify as an income tax paid to the United states for purposes of the Convention.
We trust the above is the information you require.
Yours truly,
for Director Reorganizations and Non-Resident Division Rulings Directorate Legislative and Intergovernmental Affairs Branch
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