Translation disclaimer
This translation was prepared by Tax Interpretations Inc. The CRA did not issue this document in the language in which it now appears, and is not responsible for any errors in its translation that might impact a reader’s understanding of it or the position(s) taken therein. See also the general Disclaimer below.
Principal Issues: [TaxInterpretations translation]
1) Are pension amounts received by a Canadian resident from various foreign organizations taxable in Canada?
2) Do the pension amounts paid by these organizations constitute social security pensions?
3) Do the foreign authorities have to provide any documentation of the amounts paid to the taxpayer?
Position:
1) Part of the amounts received from Germany is taxable in Canada. The pension amounts received from Belgium and France are only taxable in those two countries.
2) Amounts received from Germany, Belgium and the Caisse nationale d'assurance de vieillesse are social security payments. The amounts from ARRCO and CRICA are supplementary pension plans.
3) Yes.
Reasons:
1) Interpretation of Article 18 of the various applicable tax treaties.
2) Analysis of the different regimes.
3) Paragraph 153(1)(d) and subsection 200(1) of the Regulations.
XXXXXXXXXX 2003-003058
Michelle Desrosiers,
Notary, M.Fisc.
October 3, 2003Dear Sir,
Subject: Foreign pensions
This is further to your letter of July 8, 2003 concerning the tax treatment of pension amounts you will receive as a resident of Canada from various foreign organizations. Specifically, you wish to know whether the amounts received from the following foreign organizations will be taxable in Canada and whether they constitute social security pension payments. You also wish to know whether those organizations must provide you with slips or other documents evidencing the amounts paid.
Plans covered here:
Germany: Bundesversicherungsanstalt
Belgium: Office national des pensions
France: Caisse nationale d'assurance de vieillesse (CNAV)
ARRCO, Association des régimes de retraites complémentaires
CRICA, Caisse de retraite des cadres
As explained in Information Circular 70-6R5, it is not the Directorate's practice to comment on proposed transactions involving specific taxpayers otherwise than in the form of an advance tax ruling. We are, however, prepared to provide the following general comments, which you may find useful.
Comments
Subparagraph 56(1)(a)(i) of the Income Tax Act (the "Act") provides that any amount received by a taxpayer in the year as a "superannuation or pension benefit" within the meaning of subsection 248(1) is to be included in computing the taxpayer's income for the taxation year.
Superannuation or pension benefits received by a resident of Canada from a foreign superannuation or pension plan are included in computing the resident's income pursuant to subparagraph 56(1)(a)(i) in the same manner as a pension received from a source in Canada. However, such pension income may be deductible from taxable income under the provisions of paragraph 110(1)(f) if it is exempt from income tax in Canada because of the provisions of a tax treaty.
Tax treaties
Agreement Between Canada and the Federal Republic of Germany
By virtue of subparagraph 3(c) of Article 18 of that treaty, benefits under the social security legislation in a Contracting State (Germany) paid to a resident of the other Contracting State (Canada) may be taxed in that other State (Canada). However, the amount of such benefits which would be excluded from taxable income in the first State (Germany) if the recipient were resident there is exempt from tax in the other State (Canada). Broadly speaking, the amount taxable by Canada is calculated on the basis of the non-capital portion of the pension. The taxable portion depends on the age of the taxpayer at the start of the benefit payment. For example, if the benefit payments start when the claimant is 65 years old, the taxable amount is 27% of the benefit. This percentage remains unchanged throughout the life of the claimant. Attached is a table of the different percentages applicable to the taxable portion of the amount of benefits received by a Canadian resident under German social security legislation.
According to the information you have submitted to us, the German Bundesversicherungsanstalt plan is equivalent to the Canadian pension plan or the Quebec pension plan. In these circumstances, we consider that the German plan that is the subject of this letter constitutes a social security plan for the purposes of the tax treaty signed between Canada and the Federal Republic of Germany.
Convention Between Canada and Belgium
Paragraph 2 of Article 18 of that Convention provides that, notwithstanding the provisions of paragraph 1, payments under the social security legislation of one Contracting State (Belgium) to a resident of the other Contracting State (Canada) shall be taxable only in the first-mentioned State (Belgium). Payments from the Belgian Office National des Pensions (ONP) were considered by the Tax Court of Canada in The Estate of Michel Hausmann v. The Queen, [1998] 4 CTCTCC 2232 to be social security payments for the purposes of Article 18(2) of the Canada-Belgium tax treaty. Consequently, benefits received by a taxpayer from the Office National des Pensions (ONP) plan will only be taxable in Belgium and not in Canada.
Tax Convention Between Canada and France
Paragraph 1 of Article 18 of that Convention provides that pensions and other similar allowances, whether periodic or not, arising in a Contracting State (France) and paid in respect of past employment to a resident of the other Contracting State (Canada) shall be taxable only in the Contracting State (France) in which they arise. The Canada Customs and Revenue Agency is of the opinion that social security pensions constitute pensions and qualify as pensions and other similar allowances for the purposes of paragraph 1 of Article 18 of the Canada-France Convention. The Caisse nationale d'assurance de vieillesse (CNAV) is the general social security plan in France. It is therefore relevant to consider it as such for the purposes of the provisions of the Canada-France tax treaty.
As for the French plans ARRCO, Association des régimes de retraites complémentaires des salariés and CRICA, Caisse de retraite des cadres, we are of the view that they constitute pension plans supplementary to the social security system.
Consequently, amounts received by a Canadian taxpayer from the Caisse nationale d'assurance vieillesse (CNAV), ARRCO, Association des régimes de retraite complémentaires des salariés, and CRICA, Caisse de retraite des cadres, are only taxable in France and not in Canada, provided they are paid in respect of previous employment.
Under paragraph 153(1)(b) of the Act and subsection 200(1) of the Income Tax Regulations, a T4A slip must be filed by any person paying superannuation or pension benefits, whether or not the amounts received are taxable in Canada. However, the Canadian tax authorities have no way of ensuring compliance with this requirement by a foreign payer. It should be noted, however, that the competent authorities of Germany, Belgium and France have entered into agreements with Canada allowing them to exchange relevant information concerning any income subject to tax.
You should contact the tax authorities in your province of residence to determine the tax consequences in that province for amounts received from various foreign pension plans.
Best regards,
Section Manager
For the Director of the Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch
ANNEX
Age of the taxpayer at the time of commencement of the annuity payment
Taxable portion of the annuity (percentage)
Age of the taxpayer at the time of commencement of the annuity payment
Taxable portion of the pension (percentage)
0 to 3
73
55
38
4 to 5
72
56
37
6 to 8
71
57
36
9 to 11
70
58
35
12 to 13
69
59
34
14 to 15
68
60
32
16 to 17
67
61
31
18 to 19
66
62
30
20 to 21
65
63
29
22 to 23
64
64
28
24 to 25
63
65
27
26 to 27
62
66
26
28
61
67
25
29 to 30
60
68
23
31
59
69
22
32 to 33
58
70
21
34
57
71
20
35
56
72
19
36 to 37
55
73
18
38
54
74
17
39
53
75
16
40
52
76
15
41 to 42
51
77
14
43
50
78
13
44
49
79
12
45
48
80 to 81
11
46
47
82
10
47
46
83
9
48
45
84 to 85
8
49
44
86 to 87
7
50
43
88
6
51
42
89 to 91
5
52
41
92 to 93
4
53
40
94 to 96
3
54
39
as of 97
2
This data does not apply to pensions starting before January 1, 1955.
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© Her Majesty the Queen in Right of Canada, 2003
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