2015-0566911E5 Swiss Pension

Principal Issues: Whether a Canadian resident would be entitled to claim a deduction under subparagraph 60(j)(i) of the Act for a lump-sum transfer from a Swiss Pillar 2 vested benefit account to an RRSP.

Position: Yes, provided that the conditions in subparagraph 60(j)(i) are met.

Reasons: Subparagraph 60(j)(i) of the Act provides for a deduction where a lump sum amount is received from a superannuation or pension plan and a contribution is made to the recipient's RRSP within the period specified in the legislation.

Author: Podor, Karina
Section: 56(1)(a); 60(j)

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                                                                                                                                2015-056691
                                                                                                                                K. Podor

May 21, 2015

Dear XXXXXXXXXX:

Re:   Transfer of Swiss pillar 2 vested benefits account to a registered retirement savings plan

This is in reply to your correspondence dated January 20, 2015, wherein you requested whether a transfer of funds held in your compte de libre passage 2e pilier (“pillar 2 vested benefits account”) in Switzerland to a registered retirement savings plan (“RRSP”) would be eligible for a deduction under paragraph 60(j) of the Income Tax Act, R.S.C. 1985 (5th Suppl.) c.1, (the “Act”).  In addition, you have asked for confirmation of the reporting on your income tax and benefit return.

This technical interpretation provides general comments about the provisions of the Act and related legislation (where referenced).  It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination.  The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R6, “Advance Income Tax Rulings and Technical Interpretations”.

We understand the facts in your particular situation to be as follows:

*     You were a resident of Switzerland and a member of a pillar 2 company pension plan.
*     At the end of your employment, you transferred the balance in your pillar 2 company pension plan to a pillar 2 vested benefits account which is administered by a Swiss institution.
*     You have been a resident of Canada since XXXXXXXXXX.
*     You wish to withdraw the funds in your pillar 2 vested benefits account and transfer the lump sum amount to your RRSP.

The Canada Revenue Agency’s (“CRA”) general views regarding the transfer of amounts from non-registered pension plans to Canadian registered plans are found in Interpretation Bulletin IT-528, “Transfers of Funds Between Registered Plans”. 

Paragraph 26 of IT-528 discusses the application of subparagraph 60(j)(i) of the Act which allows a special deduction for a pension benefit received by an individual from a non-registered pension plan (such as a foreign pension plan) that is transferred to a registered pension plan (“RPP”) or an RRSP.  Since you are not contemplating a transfer to an RPP, we will restrict our general comments to transfers to RRSPs.

The following conditions must be met in order for an individual to be eligible for a deduction under subparagraph 60(j)(i) of the Act in computing their income for a taxation year:

*     The foreign plan must constitute a superannuation or pension plan for purposes of the Act.  The determination of whether a foreign plan is a superannuation or pension plan is a question of fact.  Generally, a plan will be considered a superannuation or pension plan where contributions have been made to the plan by or on behalf of an employer or former employer of an employee in consideration for services rendered by the employee and the contributions are used to provide an annuity or other periodic payment on or after the employee’s retirement. 
*     The pension benefit must not be part of a series of periodic payments.  Only lump sum payments are eligible for the deduction.
*     The pension benefit must be attributable to services rendered by the individual (or the individual’s spouse or common-law partner) to an employer in a period throughout which the individual was not resident in Canada.
*     The pension benefit must be included in the individual’s income for the year and not be exempt from tax in Canada because of an income tax treaty.  In this regard, the Act provides for pension benefits to be included in the recipient’s income in the year received and the Canada-Switzerland income tax convention does not limit Canada’s right to tax pension payments received from a Swiss pension plan by a Canadian resident.

The RRSP contribution must be made in the year the pension benefit is received or within 60 days after the end of that year.  There is no requirement that the RRSP contribution be made by way of a direct transfer from the foreign pension plan.  In addition, the individual must designate the RRSP contribution as a transfer in their income tax and benefit return for the year.  The amount of the deduction is limited to the lesser of the amount designated and the amount of the benefit included in income.  The deduction is over and above an individual’s regular RRSP deduction limit. 

Based on the information provided in your correspondence, it appears that you would be entitled to claim a deduction under subparagraph 60(j)(i) of the Act in respect of a lump sum amount you receive from your Swiss pillar 2 vested benefits account, provided that you make the contribution to your RRSP in the year the pension benefit is received or within 60 days after the end of that year.  The full lump sum amount received, before withholding taxes, should be reported on your income tax and benefit return at line 130. 

The amount should be reported in Canadian currency using the particular exchange rate in effect at the time the amount was received.

We trust our comments will be of assistance.

Lita Krantz, CPA, CA
for Director
Deferred Income Plans Section II
Financial Industries and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

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