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.
Principal Issues:
Do contributions to the "Civil Service Retirement System" ("CSRS") in the United States qualify as "non-business-income taxes" for purposes of the foreign tax credit provisions in section 126 of the Income Tax Act (the "Act").
Position:
no
Reasons:
CSRS contributions are not U.S. social security taxes as described in IT-122R2 and are not non-business-income taxes under section 126 of the Act.
950661
XXXXXXXXXXG. Middleton
(613) 957-2122
Attention: XXXXXXXXXX
October 30, 1995
Dear Sir:
Re: Contributions to the "Civil Service Retirement System" ("CSRS") in the United States
This is in reply to your letter of February 14, 1995 and further to our telephone conversation of October 12, 1995 in which you requested a technical interpretation on whether CSRS contributions qualify as "non-business-income taxes" for purposes of the foreign tax credit provisions in section 126 of the Income Tax Act (the "Act"). We apologize for the delay in our response.
Interpretation Bulletin IT-122R2 indicates that "United States social security taxes", as described therein, may qualify as "non-business-income taxes" under subsection 126(7) of the Act for the purposes of claiming a foreign tax credit under subsection 126(1) of the Act. As a matter of interest, the term "United States social security taxes" is also found in the proposed March 17, 1995 Protocol (the "Protocol") amending the Canada-U.S. Income Tax Convention (the "Convention") in Article 1 of the Protocol.
The literature which you sent to us from the Department of Veterans Affairs in the U.S. indicates that there are substantial differences between CSRS contributions and "United States social security taxes". Some of the differences are as follows:
(i)The CSRS, the "Federal Employees Retirement System" ("FERS") and the U.S. social security system are three different systems. Contributions to the CSRS are not referred to as social security taxes in the literature which you sent to us and we understand that the U.S. authorities do not regard contributions to the CSRS as social security taxes.
(ii)Employees hired before December 31, 1983 and making contributions to the CSRS have had the option since that date to opt out of the CSRS and convert to FERS.
(iii)We understand that the CSRS is basically a pension plan which is a defined benefit plan similar to the Public Service Superannuation Plan in Canada.
In our view, contributions to the CSRS are not "United States social security taxes" as referred to in IT-122R2, the Protocol or the Convention and such contributions do not qualify as "non-business-income taxes" for purposes of claiming a foreign tax credit under section 126 of the Act. The above noted differences between CSRS contributions and "United States social security taxes" tend to support our views.
If you should require any additional information or confirmation regarding the U.S. Social Security System, we suggest you write to the Social Security Administration, Baltimore, Maryland, 21235.
We trust our comments will be of assistance to you.
Yours truly,
for Director
Reorganizations and Foreign Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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