10 January 1990 External T.I. HBW4125 F - Finnish National Old Age Pension and Front-Veterans

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.

January 10, 1990

Dear 19(1)

Re:  Finish National Old Age Pension and Front-Veterans Supplement

We are writing in reply to your letter of November 2, 1989, concerning the taxability in Canada of certain pension benefits from Finland.

Under domestic law, residents of Canada are taxable on their world income which would include Finnish National Old Age Pension benefits and the Front-Veterans Supplement.  Whether or not exemption form tax is provided by Finland, these amounts are fully taxable in Canada.

The Income Tax Convention between Canada and Finland (effective January 1, 1958) contains no provisions that exempt these particular sources (whether "pension" income or not under the treaty definitions) form tax in Canada.  If Finland has a right to tax the National Old Age Pension benefits and the Front-Veterans Supplement, Canada would allow a foreign tax credit for Finnish taxes withheld.  The credit, pursuant to Article XIII of the Convention, cannot exceed the Canadian taxes attributable to those sources.  Effectively, the taxpayer would pay tax on these sources of the higher rate between the two countries.

We are of the understanding that the Finnish tax administration interprets the terms "pension" and "annuity" for purposes of the treaty to exclude social security pensions arising in Finland. We have reservations about a blanket interpretation in this manner.  We will be writing to our tax counterparts in Finland to resolve the issue.

We will write back to you when we hear form Finland.  In the meantime, if you have any questions, please contact Jim Wilson of this office at 957-2063.

Yours sincerely,

C. SavageA/DirectorProvincial and International Relations Division

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