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.
May 12, 1973
DIRECTOR PROVINCIAL AND INTERNATIONAL RELATIONS DIVISION
RULINGS DIVISION J.R. O'Hara Mr. P.H. Barnes
New Canada-United Kingdom Tax Treaty Article 17-Pensions and Annuities
In your memo to us dated April 25 you asked for our comments in connection with the interpretation of the Article on pensions to be included in the new treaty with the U.K.
We concur with your opinion that the method proposed by the U.K. for assigning tax to pension income on a fractional basis could be followed by us as well. The breakdown required will be the tax attributable to the pension in the country of residence of the recipient. The tax imposed by the source country will be limited to the lesser of
(a) the tax normally imposed.ander their law and
(b) the tax attributable to the pension in the country of residence.
It appears to us that the pro-rating in your example on page 2 of your draft reply is geared to the source country (where an allocation would seldom be required) rather than to the country of residence of the recipient.
The election provided in section 217 should not provide any complication as that will alter only "the tax normally imposed" by the source country, referred to in (a) above.
If, for some reason, there was no income tax attributable to the pension income in the country of residence then the source country could be obliged to refund any tax previously withheld.
I trust these comments will be helpful to you and if you would like to discuss them further please do not hesitate in contacting us.
Director Rulings Division Legislation Branch
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