13 June 1991 Ruling 911401 F - Withholding Taxes on Pension Benefits

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.

This is in reply to your letter in which you requested that Canadian withholding taxes on your pension income be reduced or eliminated.  Our understanding of the facts is as follows:

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Our Comments:

Under the Canadian tax system, a superannuation or pension benefit (other than C.P.P. and O.A.S. benefits) arising in Canada and paid to a nonresident of Canada is subject to a 25% withholding tax. Pursuant to Article XVIII of the Canada-U S.  Income Tax Convention ("Treaty"), the amount of tax that Canada can withhold on pension income paid to a resident of the U.S. is reduced from 25% to 15%

The U.S. also has a right to tax the pension income (as well as one-half of the C.P.P. and O.A.S. benefits) but must provide the taxpayer with a credit against U.S. taxes for the taxes paid to Canada.  We understand that under U.S. law the amount of this credit is limited to the amount of taxes that you paid to the U.S. in respect of the Canadian income.  Because the rate of tax payable to the U.S. on your Canadian income is less than 15%, the amount of taxes payable to the U.S. is less than the amount of taxes withheld by Canada.

In our opinion this does not constitute double taxation of the Canadian income.  Your Canadian pension income is taxed at 15% by Canada and at nil by the U.S.  If our understanding of the facts is correct, no refund of Canadian tax would be forthcoming.

We trust the above explanation is satisfactory for your purposes.

Yours truly,

for DirectorReorganization sand Non-Resident DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch