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.
March 29, 1994
International Taxation Office Rulings DirectorateTechnical Interpretations Group
Attention: Steve Gillis
Social Security Contributions to Foreign Countries
This is in reply to your memorandum dated June 9, 1993 wherein you inquired whether payments made to a German social security plan qualify as an income or profits tax for the purposes of section 126 of the Income Tax Act (the "Act").
While they may not be "Taxes Covered" for the purposes of the Agreement Between Canada and the Federal Republic of Germany for the Avoidance of Double Taxation With Respect to Taxes on Income and Certain Other Taxes (1981), we have taken the position, XXXXXXXXXX that mandatory contributions made to a foreign social security plan, which is similar to that of the United States, will constitute an "income or profits tax" for the purposes of the Act, in particular section 126 and clause 115(2)(e)(i)(A) of the Act. In addition, we have previously confirmed to the general public that the German social security plan is similar to the U.S. social security plan for the purposes of the Act.
Accordingly, where a Canadian resident or deemed resident of Canada makes mandatory contributions to a German social security plan, such contributions would qualify as an income or profits tax for the purposes of subsection 126(1) of the Act.
It is our understanding that a significant number of residents of Canada may be in a position to make voluntary contributions to the social security plans of countries where they lived prior to immigrating to Canada. As such payments are made on a voluntary basis, they are not considered an income or profits tax for the purposes of clause 115(2)(e)(i)(A) or paragraph 126(7)(c) of the Act.
We trust this is the information you require.
for DirectorReorganizations and Foreign DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch
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