T.B. Kuss (613) 957-2120
July 28, 1987
This is in response to your letter of June 30, 1987 concerning the eligibility for a foreign tax credit of an amount equal to the tax withheld from dividend payments received from a U.S. corporation by a self-directed registered retirement savings plan ("RRSP").
It is not within the scope of the Rulings Directorate's authority to respond to questions relating to a taxpayer's specific fact situation. However, we can provide the following general comments.
An RRSP is generally not subject to tax in Canada on income earned within the plan from qualified investments. Therefore, it cannot utilize any foreign tax credit that might otherwise be available to it. A beneficiary of an RRSP is not considered to have paid the tax withheld on the foreign source income earned by the RRSP. Therefore, the tax withheld is not available to the beneficiary to reduce his income tax otherwise payable.
However, it appears that pursuant to paragraph 2 of Article XXI of the Canada-U.S. Income Tax Convention, 1980 interest or dividends received by an RRSP from U.S. sources may be exempt from tax in the U.S. If tax was withheld in such a case, consideration should be given to contacting the U.S. tax authorities and obtaining a refund for the RRSP.
We hope these comments are of assistance.
Yours truly,
for Director Reorganizations and Non-Resident Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch