17 March 1997 Internal T.I. 9700917 - PENSION FROM THE INTERNATIONAL COURT OF JUSTICE

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:

Whether pension income from the International Court of Justice ("ICJ") is taxable in Canada (the ICJ is part of the United Nations).

Position:

Yes.

Reasons:

It is a "superannuation or pension benefit" as defined in subsection 248(1) of the Act. Furthermore, section 18 of Article V of the Convention on the Privileges and Immunities of the United Nations ("Convention") provides exemption from tax to those United Nations officials on the salaries and emoluments paid to them by the United Nations. We are not aware of any provision in the Convention that would exempt from Canadian tax pensions received from the United Nations. The taxation by Canada of such pensions received from the ICJ would be consistent with the way the Department has treated amounts received by Canadian residents from the United Nations Joint Staff Pension Fund.

										March 17, 1997

	Scarborough Tax Services Office 			Income Tax Rulings and
M. Falco		 					Interpretations
	Resource Officer		 				Directorate
	Client Services						Jim Wilson
(613) 957-2123
									970091

Pension Income from the International Court of Justice ("ICJ")

This is in reply to your memorandum dated January 8, 1997 in which you asked for our comments concerning the tax treatment in Canada of a pension received by a resident of Canada from the ICJ. You have provided a copy of a letter from an official of the ICJ which reads in part that the "Statute of the International Court of Justice, which is an integral part of the Charter of the United Nations, provides, in Article 32, that salaries, allowances and compensation of Members of the Court, including retirement pensions, shall be free of all taxation".

Article 32 of the Statute of the International Court of Justice (the "Statute") reads as follows:

1. Each member of the Court shall receive an annual salary.

2. The President shall receive a special annual allowance.

3. The Vice-President shall receive a special allowance for every day on which he acts as President.

4. The judges chosen under Article 31, other than Members of the Court, shall receive compensation for each day on which they exercise their functions.

5. These salaries, allowances, and compensation shall be fixed by the General Assembly. They may not be decreased during the term of office.

6. The salary of the Registrar shall be fixed by the General Assembly on the proposal of the Court.

7. Regulations made by the General Assembly shall fix the conditions under which retirement pension may be given to Members of the Court and to the Registrar, and the conditions under which Members of the Court and the Registrar shall have their travelling expenses refunded.

8. The above salaries, allowances, and compensation shall be free of all taxation. (underlining for emphasis)

Our Comments

Canadian residents are generally required to include in their income all amounts received as a "superannuation or pension benefit" pursuant to subparagraph 56(1)(a)(i) of the Income Tax Act (the "Act") regardless of whether those payments arise inside or outside Canada. Subsection 248(1) of the Act defines "superannuation or pension benefit" to include:

"any amount received out of or under a superannuation or pension fund or plan and, without restricting the generality of the foregoing, includes any payment made to a beneficiary under the fund or plan or to an employer or former employer of the beneficiary thereunder,

(a)in accordance with the terms of the fund or plan,

(b)resulting from an amendment to or modification of the fund or plan, or

(c)resulting from the termination of the fund or plan;"

Whether pension payments received from the ICJ are in the form of a lump sum payment or a periodic pension payment, or whether such payments include a return of premiums and/or an income element, such payments, in their entirety, would be required to be included in the taxpayer's income in the year they are received.

There are certain tax exemptions in Canada available to employees of certain international organizations. However, these exemptions (ie. paragraph 81(1)(a) and subparagraph 110(1)(f)(iii) of the Act) are generally restricted to remuneration from employment and do not extend to pension income.

As the ICJ is the principal judicial organ of the United Nations, the Department would recognize any tax exemptions granted to it or its employees and officials pursuant to the Convention on the Privileges and Immunities of the United Nations ("Convention"). However, section 18 of Article V of the Convention only provides exemption from tax to those United Nations officials on the salaries and emoluments paid to them by the United Nations. We are not aware of any provision in the Convention that would exempt from Canadian tax pensions received from the United Nations. The taxation by Canada of such pensions received from the ICJ would be consistent with the way the Department has treated amounts received by Canadian residents from the United Nations Joint Staff Pension Fund.

We are not clear as to the legal authority the Statute has in Canada. It is our understanding that, with respect to the United Nations (which would include the ICJ), it is the Convention that has been recognized by an act of parliament in Canada (ie. has the force of law in Canada). Regardless, if we were to recognize the Statute as having legal force in Canada, a conclusion we could not reach without further research, we would still not interpret Article 32 of the Statute in a manner that would allow such pensions to be exempt from tax in Canada. In this regard, we note that section 8 of Article 32 of the Statute only exempts from tax "salaries, allowances, and compensation". All three of those terms are specifically mentioned in sections 1 through 6 of Article 32. However, section 7 of Article 32 refers only to "pensions" and that term has not been referred to in section 8. The tax exemption granted pursuant to section 8 of Article 32 of the Statute seems to be consistent with the tax exemptions granted to other United Nations officials pursuant to section 18 of Article V of the Convention. That is, such exemptions are restricted to salaries and emoluments.

As pension income from the ICJ is taxable under the Act, the Department must then consider the application of an income tax convention to ensure that Canada's right to tax has not been restricted or denied by the application of that particular convention. We have not been provided any information with respect to where the pension paid by the ICJ would be considered to arise. We would be glad to provide further assistance, if necessary, with respect to the application of an income tax convention once this information is obtained.

for Director
Reorganizations and International Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch