4 January 1999 External T.I. 9817575 - FOREIGN PENSION PLANS

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: Deductibility of contributions to a foreign pension plan by a Canadian resident

Position: Not deductible for Canadian income tax purposes.

Reasons: Nothing in the Act to allow the deduction and (in this case) the Canada-U.K. Treaty provides no relief.

XXXXXXXXXX 			981757
G. Kauppinen
January 4, 1999

Dear XXXXXXXXXX :

Re: Voluntary Contributions to U.K. Basic Pension

This is in reply to your letter dated June 30, 1998 wherein you requested our opinion as to the deductibility, pursuant to the Canadian Income Tax Act (the "Act"), of additional contributions that you wish to make to the U.K. National Insurance Plan. These additional contributions would increase your entitlement to benefits under the British Basic (old age) Pension when you reach age 65.

Comments

Contributions to a pension plan are generally deductible in computing income if the pension plan has been registered by Revenue Canada for the purposes of the Act. Also, a deduction from Canadian federal income taxes otherwise payable is available for contributions made to the Canada Pension Plan.

However, there is no deduction available under the Act for contributions made to a U.K. (foreign) pension plan. Nevertheless, you will be required to include in computing your income for Canadian tax purposes all amounts you receive under the British Basic Pension. This is because, as a Canadian resident, you are taxable on your world income. The Canada-U.K. Income Tax Convention (1978) does not provide any relief in this regard.

We trust our comments will be of assistance to you.

Yours truly,

Paul Lynch
for Director
Financial Industries Division
Income Tax Rulings
and Interpretations Directorate
Policy and Legislation Branch