10 March 2005 Internal T.I. 2004-0105851I7 - War Veterans Pension from Norway

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 war veteran pension from Norway received by a resident of Canada is taxable in Canada.

Position: Not enough information to give a definitive answer.

Reasons: The payment must meet the requirements in paragraph 81(1)(e).

 								March 10, 2005

	POLICY AND PLANNING BRANCH			HEADQUARTERS
	Legislative Policy Directorate		Income Tax Rulings
			  					Directorate
	Attn:  Gilles Pelletier				S.E. Thomson
(613) 957-2122

								2004-010585

War pension from Norway

We are responding to your email of November 30, 2004 in which you ask for our views on the taxation of a war pension from Norway received by a resident of Canada. The taxpayer's husband received a war pension for services with the Norwegian Air Force. The husband is now deceased, and the taxpayer is receiving the husband's pension. In addition, the taxpayer receives her own war pension from Norway.

As explained in your email, Norwegian war pensions are either tax exempt in Norway, or, in some cases, only 20% of the war pensions are tax exempt. You would like to know to what extent these pensions would also be tax-exempt in Canada.

OUR COMMENTS

In our view, it is not relevant how Norway taxes war pensions arising in Norway. A pension payment received by a resident of Canada will be exempt from taxation in Canada if the payment is described in paragraph 81(1)(e) of the Income Tax Act (the "Act"). Paragraph 81(1)(e) of the Act requires that:

• The payment is a pension payment.
• It is received on account of disability or death.
• The disability or death must have arisen out of a war.
• The country must have been an ally of Canada at the time of the war.
• The country must grant substantially similar relief to payments referred to in paragraph 81(1)(d) of the Act arising in Canada received by a resident of Norway.

Therefore, the war pension received from Norway will be exempt from taxation in Canada if it meets the above criteria.

Paragraph 81(1)(d) of the Act exempts from taxation a pension payment, an allowance or compensation received under or subject to the Pension Act, the Civilian War-related Benefits Act or the War Veterans Allowance Act, an amount received under the Gallantry Awards Order or compensation received under the regulations made under section 9 of the Aeronautics Act.

The Canada-Norway Income Tax Convention (the "Convention") was amended effective

January 1, 2003. New paragraph 4 of Article 18 (Pensions, Annuities and Alimony) provides that war veterans pensions and similar allowances arising in Canada are exempt from tax in Norway as long as they are exempt from tax in Canada. Therefore, assuming Norway gives relief under Article 18 of the Convention to those payments described in paragraph 81(1)(d) of the Act, we may conclude that the last requirement listed above for paragraph 81(1)(e) has been met.

Paragraph 13 of IT-397R, Amounts Excluded From Income - Statutory Exemptions and Certain Service or RCMP Pensions, Allowances and Compensation lists the countries that were allies or co-belligerents of Canada during the First and Second World Wars. Note that Norway appears only under the Second World War list.

We trust that our comments have been helpful.

Olli Laurikainen, Manager
for Director
International and Trusts Division
Income Tax Rulings Directorate