24 April 1990 Ruling HBW4125S1/40003 (E) F - Abrogation of Tax Agreement with South Africa

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.

April 24, 1990

Dear 19(1)

We have received your very interesting letters of March 30 and April 1, 1990, regarding your tax status.

As indicated in our earlier letter, the abrogation of the tax agreement with South Africa did not in itself place any unusual burdens on someone coming to Canada, or living here.  The abrogation of the agreement in effect allowed domestic taxation law full rein in both countries.  The agreement did not cover withholding rates or contain many other details which more modern tax conventions have.

The agreement did ensure that there would be tax credits for foreign tax, but this provision is in our domestic law so that when income arising in South Africa is taxed in Canada, provision is made for a credit against Canadian tax for taxes paid to South Africa, to the extent of the Canadian tax otherwise payable.  We know of nothing that would restrict the application of these credits.

We should emphasize that our comments are made solely in regard to tax, and questions on entry into Canada should be discussed with our embassy in Pretoria.

You made reference to your income and what rates might apply.  It would depend upon the whole of the income which you receive as to what rates would apply.  The South African securities you mention would seem to generate interest which would be included in income.

For your information we are enclosing a copy of a tax return which would be filed by a person resident in Canada and in the Province of Ontario.  We collect tax for most of the provinces so that when you file a return with us you also cover the provincial tax.  The provincial tax is a percentage of the federal tax and you can see that it is 52% of the federal tax payable.

The enclosed return is merely to give you an idea of the range of income and deductions covered and the rates.  Being a progressive tax, the rate changes as the level of taxable income increases, but on an incremental basis.  If after taking deductions and credits, your taxable income were to be less that $27,803 you would pay a federal rate of 17% and then a provincial tax of 52% of that amount, which would mean something over 25% of your taxable income would be paid as tax.  That is oversimplifying it since you will note that there are adjustments on the Schedule 1 - Detailed Tax Calculation.

The interest income to which you make reference would be declared on the first page of the return in line 121.  That part of the return is broken down into four categories of income.

Page 2 of the return shows you the deductions to reach taxable income and then the credits against the taxable income.  In calculating the credits you would be able to include the personal amounts referred to in lines 300, 301 and 303.

The return has many schedules and there is a guide, but in the circumstances it does not seem worthwhile to send these to you. The enclosed documents give you an idea of the complexity and the rates applied.

The Canadian system is a self-assessment system with the responsibility on the taxpayer to file and report income.  We hope that this gives you the flavour of the system and that this will be of assistance to you.

Yours sincerely,

Christine Savage A/DirectorProvincial and International Relations Division

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