7 July 1999 External T.I. 9905655 - IMMIGRANTS, TAX IN CANADA

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: Is there any information available on the taxation of immigrants to Canada?

Position: Yes.

Reasons: See T4055 titled “Newcomers to Canada”.

XXXXXXXXXX 990565
M. P. Sarazin
July 7, 1999

Dear Sir\Madam:

Re: Immigration to Canada and Income Taxes

This is in reply to your letter dated February 19, 1999, wherein you asked us to send you general information on the application of the Income Tax Act (Canada) (the “Act”) to persons who immigrate to Canada.

Comments

We enclose a copy of the Revenue Canada pamphlet titled “Newcomers to Canada” (T4055). This pamphlet will introduce you to the Canadian income tax system as it relates to becoming a Canadian resident. You will note that it also discusses the deemed acquisition of property, which includes investments, at their fair market value on the date of becoming a resident of Canada. Consequently, immigrants are only taxed on the gain or loss realized after becoming a resident of Canada. We also enclose a copy of the 1998 T1 General Forms which contain details on the federal and Ontario tax brackets.

Under the Act, a Canadian resident is required to report his or her world income from sources both inside and outside Canada. A part-year resident is only required to report his or her world income for the part of the year that the person is resident in Canada. The world income would include any pension income and investment income.

Finally we note that, under paragraph 1 of Article XVII of the Canada-U.K. Income Tax Convention (1978) (the “Convention”), pensions arising in a Contracting State (in your case, the U.K.) and paid to a resident of the other Contracting State (if you reside in Canada) shall be taxable only in that other State (Canada). For purposes of the Convention, the term “pension” is defined to include any payment under a superannuation, pension or retirement plan, Armed Forces retirement pay, war veterans pensions and allowances, and any payment under a sickness, accident or disability plan, as well as any payment made under the social security legislation in a Contraction State (in your case, the U.K.), but does not include any payment under a superannuation, pension or retirement plan in settlement of all future entitlements under such a plan or any payment under an income-averaging annuity contract. You may want to confirm with the U.K. tax authorities that your pension qualifies as a pension for purposes of the Convention.

We trust these comments will be of assistance.

Yours truly,

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