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I retired from the US Army and moved back to Canada in 1999 where my mother was from and where I had purchased the family home when she passed.
The problem is that every penny I make at my current job goes to taxes, every penny! And therefore, I work a 48 hour week for nothing. In fact over the last 3 years I am almost 40 Gs in debt to the Canadian Gov. I was misinformed by my first tax prepare who stated because it was foreign income derived while not a resident of Canada I too was exempt. Later the government told me I was not exempt and wanted it all back. In order to keep the family home I had to gamble that I would soon make enough money through promotions at work to pay all the taxes they wanted and also be able tyo pay my mortgage. I have now realized that the more I make the more the Canadian government takes. I owed them 6Gs for the first year, 7 for the next and because I took in a renter to help make ends meet in 2002, I now owe for 2002 a whopping $18,940.00 after what I already put in. I am now in a disgusting amount of debt!
So I give up, I have put in my letter of resignation and will try to sell my home and get the hell out of here like all smart rich Canadian Doctors, Actors, Athletes, and scientists!
But I would like to change Canada and get her out from under this liberal dictatorship and tax tyranny. I understand there is a tax treaty with England that exempts retirement income from being taxed, is this true? (if not there are some senior citizens from England that I have met who have made out like a bandit!)
If so, where do I find this treaty?
EXXXXXXXXXXXXXXXX
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david ingram replies: Article X of the United Kingdom / Canada Income tax treaty taxes dividends in both countries but limits the tax to 15% inthe country of origin. Therefoe, if you lived in Great britain and your tax rate was 33% and you received a $1,000 dicidend from Canada, you would pay Canada $150 and then another $180 to Great Britain.
Article XI of the treaty does the same thing with interest except that you would pay Canada 10% or $100 and then $230 to Great Britain.
Article XVII of the treaty does the same 10% taxation of Annuities but Pensions are only taxable in the country you live in. So if you received a Canadian Pension of $10,000, there is no tax to Canada but you would pay the 33% tax to Great Britain.
There is no exemption of retirement income per se.
You can find the whole treaty at: http://www.fin.gc.ca/treaties/UK_e.html
More important for your question is likely the United Kingdom / US Income Tax Treaty. In this treaty Articles X and XI limit the tax paid to the source country to 15% for interest and dividends. Article XVII of that treaty would only tax your US pension in Great Britain.
You can find the text of the US/UK Treaty at:
http://www.ustreas.gov/offices/tax-policy/library/uktreaty.pdf
I am interested in your complaint however. Your tax bill seems unlikely to me unless you are spending excessive sums onm lifestyle. The maximum tax rate in Canada is now around 45%. It seems to me that your accountant may have been missing foreign tax credits. For instance, when you pay your tax on the US army pension to the US, the tax paid is a credit on your Canadian return.
You should send us a couple of years of both countries to take a look at. They are likely wrong from what you have said.
Send them to:
David Ingram of the CEN-TA REALTY Group
US / Canada / Mexico tax and working Visa Specialists
US / Canada Real Estate Specialists
108-100 Park Royal South
West Vancouver, BC, CANADA, V7T 1A2
(604) 980-0321 - Fax 913-9123 [email protected]
www.centa.com www.david-ingram.com
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Be ALERT, the world needs more "lerts"
Article 17
Pensions and Annuities
1. Pensions 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. Annuities arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State. 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.
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.
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