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QUESTION:
What is the withholding tax deducted from a non-resident receiving pension income from an international pension plan which may or may not be registered in Canada but which is paid out of Canada?
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david ingram replies:
As a rule, the rate would be 25% unless the recipient was a resident of a treaty country like the United States or Great Britain or Spain, or Indonesia, etc in which case Article XVIII of most of the treaties would limit the withholding to 15%.
Even Article XVIII of the new KUWAIT Canada Income Tax Treaty calls for 15% withholding
as seen here
Article XVIII - CANADA KUWAIT Income Tax Treaty 2002
Pensions and Annuities
1. Pensions and annuities arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other Contracting State.
2. Pensions arising in a Contracting State and paid to a resident of the other Contracting State may also be taxed in the Contracting State in which they arise, and according to the law of that Contracting State. However, in the case of periodic pension payments, other than payments under the social security legislation in a Contracting State, the tax so charged shall not exceed 15 per cent of the gross amount of the payment.
3. Annuities arising in a Contracting State and paid to a resident of the other Contracting State may also be taxed in the Contracting State in which they arise, and according to the law of that Contracting State; but the tax so charged shall not exceed 15 per cent of the portion thereof that is subject to tax in that Contracting State. However, this limitation does not apply to lump-sum payments arising on the surrender, cancellation, redemption, sale or other alienation of an annuity.
4. As used in this Article:
a) the term "pensions" means periodic payments, including payments under the social security legislation in a Contracting State, made after retirement in consideration of past employment or by way of compensations for injuries received in connection with past employment;
b) the term "annuity" means a stated sum payable periodically at stated times during life, or during a specified or ascertainable period of time, under an obligation to make the payments in return for adequate and full consideration in money or money's worth.
Article 19
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