Date: Thursday February 08, 2007
Time: 04:53 PM -0500
QUESTION:
Sir, Both my wife and I have about 10 years each of National Insurance fees
paid with UK Social Security system. Is it worth transferring this into the
Canadian pension system since we will be moving to toronto and intend to
work and stay there.
Thank you
----------------------------------
david ingram replies:
There is no method of moving it or transferring it to the CPP. However,
when you do retire, you will be able to collect a pro-rated pension from the
UK in Canada. The disadvantage is that "at the moment" the UK pension odes
not index (i.e. increase with the cost of living) while you are in Canada
while it would if you were moving to the US. You need to write your
representative and get him or her to work at equalizing the rights of UK
pensioners in Canada with those in the USA.
This other two day old question (in reverse) may help you a bit as well.
-----------
My_question_is: Applicable to Another Jurisdiction or Multi-jurisdictions
Subject: Pension income
Expert: taxman at centa.com
Date: Sunday February 04, 2007
Time: 01:21 PM -0500
QUESTION:
I am a Canadian citizen living and working in England. I am maintaining my
Canadian bank account, credit card, RRSPs and other ties as I intend to
return.
1. In Jan '07 I started receiving my BC work-related pension through
monthly payments deposited to my Canadian bank account. Should I ask that
25% be withheld for income tax? This is what I understand the tax guidance
to say. However, a friend here in England in the same circumstances tells
me that her Canadian pension is tax free while she lives in England. I
noticed that my first pension deposit was for the full amount with no tax
withheld although they know my situation.
2. Once my line of credit is cleared, I will be accumulating savings and
earning interest in Canada. I think the tax guidance says that 25% should
also be withheld from interest earnings. Is this correct?
Thank you very much for your advice.
(I recently asked for advice about my residency status and appreciated your
response but have not yet sorted it with ccra.)
-----------------------------------------
david ingram replies:
1. Your pension is not subject to Canadian Tax under Article 17(1) of the
UK/Canada Income Tax Convention (Treaty) as follows. I have put the country
names in the brackets. Note that you (and your friend) DO OWE TAX TO THE UK
on your Canadian Pensions.
=================================================
Article 17
Pensions and Annuities
1. Pensions arising in a Contracting State (CANADA) and paid to a resident
of the other Contracting State (Great Britain) who is the beneficial owner
thereof shall be taxable only in that other State (Great Britain).
2. Annuities arising in a Contracting State (CANADA) and paid to a resident
of the other Contracting State (GREAT BRITAIN) may be taxed in that other
State (GREAT BRITAIN). However, such annuities may also be taxed in the
Contracting State in which they arise and according to the laws of that
State, but if the recipient is the beneficial owner of the annuities the tax
so charged shall not exceed 10 per cent of the portion thereof that is
subject to tax in that State. (Should be 10% withholding paid to CANADA).
3. For the purposes of this Convention, the term "pension" includes any
payment under a superannuation, pension or retirement plan, Armed Forces
retirement pay, war veterans pensions and allowances, and any payment under
a sickness, accident or disability plan, as well as any payment made under
the social security legislation in a Contracting State, but does not include
any payment under a superannuation, pension or retirement plan in settlement
of all future entitlements under such a plan or any payment under an
income-averaging annuity contract.
4. For the purposes of this Convention, 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, does
not include a pension or any payment under a superannuation, pension or
retirement plan in settlement of all future entitlements under such a plan
or any payment under an income-averaging annuity contract.
5. Notwithstanding any other provision of this Convention, alimony and
similar payments arising in a Contracting State and paid to a resident of
the other Contracting State who is the beneficial owner thereof shall be
taxable only in that other State.
=====================
2. The interest is taxed 10% in Canada first and then added to your UK
income as stated in Article 11(2) of the Treaty as follows:
Article 11
Interest
1. Interest arising in a Contracting State (CANADA) and paid to a resident
of the other Contracting State may be taxed in that other State (UK).
2. However, such interest may be taxed in the Contracting State (CANADA) in
which it arises, and according to the law of that State; but if the
recipient is the beneficial owner of the interest, the tax so charged (BY
CANADA) shall not exceed 10 per cent of the gross amount of the interest.
3. Notwithstanding the provisions of paragraph 2 of this Article:
(a) interest arising in the United Kingdom and paid to a resident of Canada
shall be taxable only in Canada if it is paid in respect of a loan made,
guaranteed or insured, or a credit extended, guaranteed or insured by the
Export Development Corporation; and
(b) interest arising in Canada and paid to a resident of the United Kingdom
shall be taxable only in the United Kingdom if it is paid in respect of a
loan made, guaranteed or insured, or a credit extended, guaranteed or
insured by the United Kingdom Export Credits Guarantee Department.
4. (a) Notwithstanding the provisions of paragraph 2 of this Article,
interest arising in Canada and paid in respect of a bond, debenture or other
similar obligation of the Government of Canada or of a political subdivision
or local authority thereof shall, provided that the interest is beneficially
owned by a resident of the United Kingdom, be taxable only in the United
Kingdom;
(b) Notwithstanding the provisions of Article 29 Canada may, on or before
the thirtieth day of June in any calendar year give to the United Kingdom
notice of termination of this paragraph and in such event this paragraph
shall cease to have effect in respect of interest paid on obligations issued
after 31 December of the calendar year in which the notice is given.
5. The term "interest" as used in this Article means income from debt-claims
of every kind, whether or not secured by mortgage, and whether or not
carrying a right to participate in the debtor's profits, and in particular,
income from government securities and income from bonds or debentures,
including premiums and prizes attaching to bonds or debentures, as well as
income assimilated to income from money lent by the taxation law of the
State in which the income arises. However, the term "interest" does not
include income dealt with in Article 10.
6. The provisions of paragraphs 1, 2 and 4 of this Article shall not apply
if the recipient of the interest, being a resident of a Contracting State,
carries on business in the other Contracting State in which the interest
arises through a permanent establishment situated therein, or performs in
that other State professional services from a fixed base situated therein,
and the debt-claim in respect of which the interest is paid is effectively
connected with such permanent establishment or fixed base. In such a case,
the provisions of Article 7 or Article 14, as the case may be, shall apply.
7. Interest shall be deemed to arise in a Contracting State when the payer
is that State itself, a political subdivision, a local authority or a
resident of that State. Where, however, the person paying the interest,
whether he is a resident of a Contracting State or not, has in a Contracting
State a permanent establishment in connection with which the indebtedness on
which the interest is paid was incurred, and that interest is borne by that
permanent establishment, then such interest shall be deemed to arise in the
Contracting State in which the permanent establishment is situated.
8. Where, owing to a special relationship between the payer and the person
deriving the interest or between both of them and some other person, the
amount of interest paid exceeds for whatever reason the amount which would
have been paid in the absence of such relationship, the provisions of this
Article shall apply only to the last-mentioned amount. In that case, the
excess part of the payments shall remain taxable according to the law of
each Contracting State, due regard being had to the other provisions of this
Convention.
9. Any provision in the law of a Contracting State relating only to interest
paid to a non-resident company shall not operate so as to require such
interest paid to a company which is a resident of the other Contracting
State to be treated as a distribution of the company paying such interest.
The preceding sentence shall not apply to interest paid to a company which
is a resident of a Contracting State in which more than 50 per cent of the
voting power is controlled, directly or indirectly, by a person or persons
resident in the other Contracting State.
10. The provisions of paragraph 2 of this Article shall not apply to
interest where the beneficial owner of the interest-
(a) does not bear tax in respect thereof in Canada; and
(b) sells (or makes a contract to sell) the holding from which the interest
is derived within three months of the date on which such beneficial owner
acquired that holding.
===========================================================
David Ingram's US / Canada Services
US / Canada / Mexico tax, Immigration and working Visa Specialists
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email to taxman at centa.com
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Disclaimer: This question has been answered without detailed information or
consultation and is to be regarded only as general comment. Nothing in
this message is or should be construed as advice in any particular
circumstances. No contract exists between the reader and the author and any
and all non-contractual duties are expressly denied. All readers should
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practitioner or tax specialist for expert help, assistance, preparation, or
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