Principales Questions: Whether an annuity from Canada that is paid to a resident of Turkey is taxable in Canada and whether a reduction of the Canadian tax rate is available under the Convention with respect of the following three types of annuity: (1) an annuity payment under a contract that is subject to section 12.2; (2) an annuity payment that is included under paragraph 56(1)(d); and (3) a payment pursuant to a contract under paragraph (a) of the definition of "retirement savings plan" in subsection 146.
Position Adoptée: (1) Reduced Canadian tax rate applicable under paragraph 3 of Article 18 of the Convention. (2) Reduced Canadian tax rate applicable under paragraph 3 of Article 18 of the Convention. (3) Reduced Canadian tax rate applicable under paragraph 2 of Article 18 of the Convention.
Raisons: (1) In our view, an annuity payment that is subject to section 12.2 is not excluded from the definition of the term "annuities" in paragraph 5 of Article 18 of the Convention. The reduced Canadian tax rate in paragraph 3 of Article 18 of the Convention is then applicable. (2) It is our view that an annuity payment that is subject to paragraph 56(1)(d) is not excluded from the definition of the term "annuities" in paragraph 5 of Article 18 of the Convention. The reduced Canadian tax rate in paragraph 3 of Article 18 of the Convention is then applicable. (3) The definition of "annuities" in paragraph 5 of Article 18 of the Convention excludes any annuity the cost of which was deductible for the purposes of taxation in Canada. In our view, that excludes a contract under paragraph (a) of the definition of "retirement savings plan" in subsection 146(1), as the premiums paid under the plan are deductible. An annuity payment under such type of contract is a periodic pension payment for which a reduced Canadian tax rate is available.
