QUESTION:
I have just moved to Vancouver and have a 3 year
Temporary Work Permit. I am employed by a Canadian
company and now own a house in BC. I have no other
sources of income other than a monthly UK military
pension paid net into an off-shore account.
As I am now resident in Canada, am I liable for
taxation on my UK pension, technically double taxation?
If I am, then can I arrange for this to be paid gross
in the UK and declare it on my annual Canadian taxation
return?
I had read somewhere that as an incentive to attract
professionals in those areas that Canada has a
shortage, new workers were not taxed on anything other
than their Canadian employment salary for the first 4
years. I welcome your comments/advice.
---
david ingram replies:
ARTICLE XVII UK / CANADA INCOME TAX CONVENTION (TREATY)
Pensions and Annuities
1. Pensions arising in a Contracting State (ENGLAND)
and paid to a resident of the other Contracting State
(CANADA) who is the beneficial owner thereof shall be
taxable only in that other State (CANADA).
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.
---------
I have added the maroon colouring above for the ease of
reading the context.
As you can see in XVII(1) above, your pension is
taxable in Canada and should be included on line 115 of
your Canadian Return. There is NO tax to Great
Britain.
Canada does have a tax free Immigrant Trust good for
five years. Your pension income does NOT qualify for
this however, and you would have had to start it BEFORE
you came to Canada (if you had $1,000,000 or more in
the stock market for instance). In addition, I would
have to think about it but I have never seen one where
the person was on a work permit. It is truly an
IMMIGRANT trust and is not meant to apply to temporary
workers.
However, if your intent was to apply for landed
permanent resident status, there is no reason why it
would not have worked for assets as I see it.
I / we would be glad to look after your new 2004 return
this year by email, snailmail, fax or courier or
personal visit to my rather messy home office.
You would likely do well to come out to one of our free
Financial Counselling sessions. Every Thursday
Evening, Fred Snyder and I (or one of us for sure)
conduct a free financial counselling session at 1764
West 7th in Vancouver. Call (604) 731-8900 to reserve
a seat.
the blurb says:
Every Thursday evening Fred Snyder and I hold a free
seminar at Fred's office at 1764 West 7th (corner of
Burrard in the Spence Diamond building) in Vancouver.
The topics are:
Seg funds and an alternative to the traditional RRSP.
Making your mortgage income tax deductible
Critical Care insurance for disasters.
coffee and cookies of course.
Phone 604-731-8900 to reserve your seat -and, you are
welcome to bring your brother, your sister, your mother
or father, your children, your best friend, your worst
enemy or your own financial advisor who hasn't
explained how to make your mortgage deductible.
I charge $350 for individual or phone consultations but
if you wanted a free verbal question answered:
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
Local calls are taken at (604) 280-0600 and Long
Distance calls are taken at 1( 866) 778-0600
I do not know how far the LD line reaches.
=========================================
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