24 April 2003 External T.I. 2003-0012935 - Netherlands AOW Taxable after 1994

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CCRA.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.

Principal Issues: Correction to document 2002-013578, which stated that "until 1993", AOW was exempt from taxation in Canada.

Position: Should say "until 1994", AOW was exempt from taxation in Canada.

Reasons: The Coming-Into-Force provisions of the 1993 Protocol.

XXXXXXXXXX 2003.001293
S. E. Thomson
April 24, 2003

Dear XXXXXXXXXX:

Re: Taxation of AOW from Netherlands

It has come to our attention that our letter to you of September 9, 2002, contains a small error. In that letter, we stated that, "until 1993, AOW was exempt from taxation in Canada". Please note that the letter should read, "until 1994, AOW was exempt from taxation in Canada". Because of the Coming-Into-Force provisions of the 1993 Protocol, this amendment to the Canada-Netherlands Income Tax Convention was not effective until 1995. We regret any inconvenience this may have caused.

On a related matter, we are aware that the Sociale Verzekeringsbank (SVB), which is responsible for implementation of the Dutch social insurance schemes, published a newsletter in January 2003 to say,

"This article only applies to clients living in Canada. When the officers of the International Verification Unit of the SVB conducted a survey among clients in Canada in September 2002, one of the most frequent questions they were asked was about the Dutch-Canadian tax agreement. This agreement states that clients only owe tax on their AOW pension or Anw survivor's benefit in the Netherlands. Many clients are under the impression that their pension or benefit is taxed in Canada as well.

Our verification officers promised that this query would be answered in this issue of the International Newsletter. The query has been passed on to the Dutch and the Canadian tax authorities, but they have not responded yet. We will get back to this subject in the next International Newsletter.

If you think that your AOW pension or Anw benefit is being taxed again in Canada, please contact the Canadian tax service."

The SVB has since been informed that the Canada-Netherlands Income Tax Convention provides that any pensions (including the AOW pension and the Anw Survivor's benefit) received from the Netherlands by residents of Canada may be taxed in Canada as well as in the Netherlands. In the case of periodic payments, the maximum amount that the Netherlands may withhold is 15 per cent of the gross payment that is taxable under the law of the Netherlands, and the tax withheld is creditable against Canadian tax payable to the extent permitted under the laws of Canada. The SVB promises to get back to the subject in the next International Newsletter.

Yours truly,

Olli Laurikainen
Section Manager
for Division Director
International & Trusts Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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