3 September 1993 Administrative Letter 9312692 - CANADA-JAMAICA TREATY - PENSION ARTICLE (4093-J1)

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

			931269
XXXXXXXXXX		Jim Wilson
(613) 957-2123

Attention: XXXXXXXXXX

September 3, 1993

Dear Sirs:

Re: Canada-Jamaica Income Tax Convention (the "Convention")

This is in reply to your letter dated April 28, 1993, in which you requested our interpretation of paragraph 2 of Article XIX of the Convention. In the case of a periodic pension payment arising in Canada and paid to a resident of Jamaica, paragraph 2 of Article XIX states that "the tax so charged shall not exceed the rate determined by reference to the amount of tax that the recipient of such payment would otherwise be required to pay for the year on the total amount of such payments received by him in the year, if he were resident of the Contracting State in which the payment arises".

Your first query concerns the reference to "tax" in paragraph 2 of Article XIX of the Convention and whether the term includes the additional tax provided for in subsection 120(1) of the Income Tax Act ("Act"). In our opinion the tax levied under subsection 120(1) of the Act applies to the computation of "the amount of tax" as referred to in paragraph 2 of Article XIX of the Convention. Article III of the Convention defines "tax" to mean, in the particular context, "Canadian tax" and this is defined in Article II as the income taxes imposed by the Government of Canada. The tax under subsection 120(1) of the Act forms part of an individual's Part I tax computation and therefore it is an "income tax imposed by the Government of Canada". Had the recipient been a resident of Canada, in addition to the Part I tax computed under section 117 of the Act, he would have been subject to either provincial income tax or the tax levied under subsection 120(1) of the Act. Accordingly, we are of the view that the tax under subsection 120(1) of the Act falls within the spirit of paragraph 2 of Article XIX of the Convention.

With respect to the issue of whether the recipient is required to include his world wide income or just his periodic pension payments arising in Canada in determining the rate of tax to be applied under paragraph 2 of Article XIX of the Convention on those particular sources of income, we are of the opinion that it is the recipient's world wide income that must be taken into consideration. Accordingly, unlike a section 217 election, losses occurring outside Canada could in effect reduce or eliminate the rate of tax required to be paid to Canada in a particular year in respect of periodic pension payments. If the computation of tax under paragraph 2 of Article XIX of the Convention exceeds the Canadian tax attributable to those sources as otherwise determined under Part XIII of the Act or Part I of the Act, where a section 217 election is made, the tax computed under Part XIII or the section 217 election, as the case may be, will prevail.

We trust the above comments will be adequate for your purposes.

Yours truly,

for Director
Reorganizations and Foreign Division
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch