My Client is Ex SA, where he contributed to a South African Retirement Fund. This is neither a compulsory or employment linked pension fund.
Tax Professional Answers
The exception under S.56(1)(a)(I)(D) applies if the “pension” amounts are taxable under paragraph 6(1)(g) as benefits received under an “employee benefit plan (EBP)”, taking into consideration of the exclusion under paragraph 6(1)(g)(II). If the SARA qualified as an “employment benefit plan” as defined under the Canada Income Tax Act, it would not be taxable under paragraph 6(1)(g) by virtue of the exclusion provided under subparagraph 6(1)(g)(III) (i.e., the benefits were attributable to services rendered by a person in a period throughout which the person was not resident in Canada). As such, the SARA would not qualify for the exception under S.56(1)(a)(I)(D) as it would not be taxable under paragraph 6(1)(g).
It appears that Article 18 (Pensions and Annuities) of the DTA should apply as the lump sum amount appears to be “pension” received under some kind of retirement arrangement established under the laws of South Africa, regardless of whether it is periodic or lump sum payment. Under Article 18, both South Africa and Canada have the right to tax the lump sum pension amount.
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