9 November 2011 External T.I. 2010-0380961E5 - United Kingdom Pension Contributions

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: Whether voluntary contributions made by a Canadian resident to a United Kingdom State Pension for additional years of pensionable service are deductible or whether the taxpayer is entitled to any tax credits for these voluntary foreign pension contributions?

Position: No.

Reasons: There are no provisions under the Income Tax Act that provide for a deduction of foreign pension contributions. No relief is provided by the Canada - UK Tax Convention.

XXXXXXXXXX
							2010-038096

November 9, 2011

Dear XXXXXXXXXX ,

Re: United Kingdom ("U.K.") Pension Contributions

This is in response to your letter of September 15, 2010, wherein you requested information regarding the deductibility of voluntary contributions made to your "United Kingdom State Pension" for additional pensionable years.

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request. For more information concerning advance income tax rulings, please refer to Information Circular 70-6R5 dated May 17, 2002. The following comments are, therefore of a general nature only and are not binding on the Canada Revenue Agency ("CRA").

Pursuant to paragraph 147.2(4) of the Income Tax Act (the "Act") a deduction is permitted for employee contributions to a "registered pension plan". However, the meaning of a "registered pension plan" for the purposes of the Act is provided for in subsection 248(1) of the Act as a pension plan that was registered by the Minister for the purposes of the Act. As a result, the U.K. pension plan does not satisfy the definition of a registered pension plan and there is no deduction available under the Act for contributions made to a U.K. pension plan or U.K. government social security arrangement.

Furthermore, as a resident of Canada you are taxed on your world wide income, which includes amounts received as "superannuation or pension benefit" pursuant to subparagraph 56(1)(a)(i) of the Act. The CRA generally defines a superannuation or pension plan to be a plan where contributions have been made to the plan by or on behalf of an employer or former employer of an employee in consideration for services rendered by the employee and contributions are used to provide an annuity or other periodic payment on or after the employee's retirement in consideration for his or her employment services, and, in some cases, where amounts have been contributed under the plan by a government. Consequently, you are required to include all amounts you receive from your U.K. pension plan as a superannuation or pension benefit in the computation of your income for Canadian tax purposes.

Although amounts received from a U.K. pension must be included in your income, there is a provision in the Act that gives relief from double taxation on certain income, i.e., relief from having to pay tax to both Canada and another country on the same income. In general, foreign pension amounts received by a Canadian resident may be subject to tax withholdings in the country of origin and a taxpayer may be entitled to claim a foreign tax credit. Interpretation Bulletin IT-270R3 Foreign Tax Credit provides CRA's general views on the computation of the foreign tax credit.

We trust that these comments will be of assistance.

Yours truly,

Mary Pat Baldwin, CA
for Director
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch