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.
XXX
This is in reply to your letter of July 30 concerning the Canadian government pension being received by you.
You mention that a 15% tax is being withheld from your pension payments and that this will result in an overpayment of your U.S. tax liability, which overpayment is unrecoverable so far as you can determine. Thus, you ask if there is any relief from this 15% tax.
The Canadian government pension paid to a non-resident of Canada is subject to Part XIII tax pursuant to paragraph 212(1)(h) of the Canadian Income Tax Act. This 25% rate is reduced to 15% pursuant to Article XVII of the Canada-U.S. Income Tax Convention (1980). However, there is a provision of the Income Tax Act which allows you to elect to file a tax return as though you were a resident of Canada. On this return, you would include the amount of your Canadian government pension as well as certain other Canadian sourced income such as Canada Pension Plan payments and payments under the Old Age Security Act. Deductions allowable in computing your taxable income would include personal exemptions and the pension income deduction. If the tax on this taxable income is less than that withheld from the payments made to you, the difference will be refunded. We enclose a copy of Interpretation Bulletin IT-163R2 which explains this election in greater detail.
As indicated in paragraphs 15 and 16 of IT-163R2, such an election is made by filing an income tax return each year and including therein a letter stating that you are making a "section 217" election. The 1986 returns would be available early in 1987 and may be obtained by writing to the Ottawa District Taxation Office, 360 Lisgar Street, Ottawa, Canada, K1A 0L9. A copy of the form NR-5 referred to in paragraph 19 of IT-163R2 is enclosed. This application may be mailed to the same address.
With respect to any tax paid to Canada on your Canadian pension income, we suggest that you contact the U.S. authorities to determine if a foreign tax credit is available when filing your U.S. return.
We trust the above information will be of assistance.
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© Her Majesty the Queen in Right of Canada, 1986
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© Sa Majesté la Reine du Chef du Canada, 1986
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