Although my answer was correct about not paying tax, I did not realize that
there was an actual REV.PROC 2004-37 (Revenue Procedure to quote).
And of course, he is correct that the CRA would not allow a foreign tax
credit if the pension was not US sourced.
The original writer still has to check to see if it is an actual registered
pension or is just a savings plan and he can get the principal out tax free
and only pay tax on the blended earnings on the income.
Thanks Gary.
ingram
-----Original Message-----
From: Gary Gauvin [mailto:gary at garygauvin.com]
Sent: Wednesday, December 01, 2004 6:33 AM
To: taxman at centa.com; centapede at lists.centa.com
Subject: CORRECTION RE: Pensions from US head office to
Canadian resident who has never lived or worked in the US -
Hi David.
Section 1.1441-4(b)(1)(ii) of the Income Tax Regulations provides generally
that U.S. source pension payments to a nonresident alien individual are
subject to withholding. § 1.1441-4(d)excludes certain amounts from that
withholding. There's always an exception, isn't there? :)
If the salary income was all earned from without the United States, the
pension will also be attributable to without the U.S. and therefore exempt
from withholding. Now whether the payer knows this or not is another
question. Canada, of course will not allow a foreign tax credit for US tax
paid since, the pension is not earned within the United States.
In any event, Rev Proc 2004-37 explains it all with nice examples. See
http://www.garygauvin.com/WebDocs/IRS/RevProc2004-37.pdf
I suggest the writer send a copy of the Rev Proc to his pension payer along
with a letter just to make sure they do it right from the first payment.
Hope y'all have a great day!
Gary Gauvin, EA
Dallas Texas
-----Original Message-----
From: centapede-bounces at lists.centa.com
[mailto:centapede-bounces at lists.centa.com] On Behalf Of
centapede at lists.centa.com
Sent: Wednesday, December 01, 2004 2:01 AM
To: CENTAPEDE
Subject: Pensions from US head office to Canadian resident who
has never lived or worked in the US - Ask a cross-border International real
estate rental mutual funds immigration non-resident income tax expert -
David Ingram 's CE-NTA Services in North
QUESTION:
Hi! I just retired from my company at Asia branch and moved to Canada as a
permanent resident. I received the pension from US head office for my
retirement after immigrating to Canada. I've never worked in US and also not
a US citizen. Do I have tax liability in US? How much should I report the
pension in Canada? Thanks for your answers.
---
Ask a cross-border International real estate rental mutual funds immigration
non-resident income tax expert - David Ingram 's CE-NTA Services in North
Vancouver BC Canada on It's Your Money CKBD AM600 Fred Snyder's Radio Show
------------
david ingram replies:
Morally and legally, you should not have any tax liability to the USA.
However, the payer of the pension may want to deduct 15% of the payment to
you as a non-resident withholding tax. If they do, I can imagine you would
spend months fighting them.
Easier is likely to just accept the withholding tax and claim it as a credit
on your Canadian Return.
When you get the money, convert it to Canadian Dollars and report it on line
115 of your Canadian return. Claim the $1,000 pension income deduction on
your Canadian Return.
Last but not least, the pension may not even be taxable. If you earned it
off shore and it was never used as a deduction in any country and you worked
in a country that did not have a treaty with Canada, it may qualify as a
savings account and only the interest portion would be taxable.
Do any others on this list have an opinion. I would have to see the details
of the pension to give a better answer.
Answers to this and other similar questions can be obtained free on Air
every Sunday morning.
Every Sunday at 9:00 AM on 600AM in Vancouver, Fred Snyder of Dundee Wealth
Management and I, David Ingram will be hosting an INFOMERCIAL but LIVE talk
show called "ITS YOUR MONEY"
Those outside of the Lower Mainland will be able to listen on the internet
at
www.600AM.com <http://www.600am.com/>
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