12 May 1987 Income Tax Severed Letter 5-3260 - [Taxation of pension income]

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.

D. Lanos (613) 957-2125

XXXX

May 12, 1987

XXXX

This is in reply to your letter of November 28, 1986 concerning the taxation under the Canadian Income Tax Act (the "Act") of periodic pension income arising in Canada and received by a taxpayer resident in England each month during 1986.

If the above taxpayer-recipient files a return of income pursuant to section 115 of the Act for 1986 and elects under section 217 of the Act to include in the income reported in that return his pension income received for all of 1986 plus the other Canadian-sourced income specified in section 217, in our view, parts of that pension income would be exempt from Canadian income tax in 1986 by virtue of the deductions permitted by subparagraph 110(1)(f)(i) of the Act.

Subparagraph 110(1)(f)(i) provides a deduction in computing taxable income for an amount exempt from income tax in Canada by virtue of a provision in a tax convention or agreement with another country that has the force of law in Canada.

With regard to the pension income received by a resident of the United Kingdom on or after January 1, 1986 and before April 6, 1986 from a Canadian source, it is our view that up to the first $10,000 of such income would be exempt from taxation in Canada by virtue of paragraph 1 of Article 17 of the Canada-United Kingdom Income Tax Convention (1978) (the "Convention") as amended by Article II of the Protocol to that Convention dated September 8, 1978.

As to the pension income received by a resident of the United Kingdom on or after April 6, 1986 from Canada, in our opinion, all such amounts would be exempt from taxation in Canada by virtue of paragraph 1 of Article 17 of the Convention, as amended by Article VI of the Protocol to that Convention dated April 15, 1980 and as entered into force by paragraph 1(b) of Article XII to that Protocol.

Since the above Convention does have the force of law in Canada, we agree that up to $10,000 of the pre-April 6, 1986 pension income received by the taxpayer in question and all pension income received on or after April 6, 1986 would qualify for a deduction under subparagraph 110(l)(f)(i) of the Act.

We trust that you will find the above information helpful and we apologize for the delay in our reply.

Yours truly,

for Director Reorganizations and or-Resident Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch