Upon the death of a RRIF annuitant, Part XIII does not appear to provide an exemption similar to that provided for an RRSP (paragraph 212(1)(l)) under which no tax is imposed when the funds are transferred to the RRSP or RRIF of the non-resident surviving spouse. In order to benefit from the rollover to an RRSP or RRIF for the non-resident spouse, is it required to utilize the election in s. 217, which allows the choice of applying Part I instead of Part XIII, necessary? CRA responded:
Under paragraph 212(1)(q), any payment out of or under a RRIF that would, if the non-resident person had been resident in Canada throughout the taxation year in which the payment was made, be required by section 146.3 to be included in computing the non-resident person’s income for the year is subject to an income tax rate of 25%.
An amount that would be required to be included in a taxpayer's income, including because of subsection 146.3(6.1), if resident in Canada, is deemed to have been paid to the taxpayer as a payment under a RRIF by virtue of paragraph 214(3)(i). This amount is therefore subject to Part XIII tax pursuant to paragraph 212(1)(q), except where the amount has been directly transferred by the payer, on behalf of the surviving spouse, into an RRSP or RRIF of which the surviving spouse is the annuitant or for the purpose of purchasing an eligible annuity contract and to the extent that the amount so transferred would have been deductible under paragraph 60(l) if the non-resident spouse had resided in Canada throughout the year. To be valid, the transfer must be made under an authorization in the prescribed NRTA1 form.