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.
- 1. Tax to be withheld per IC 76-12R4 [Information Circular 76-12R4]
XXX
- 2. Paragraph 1(a) 15% of pension Subject to Part XIII Tax
- 3. Paragraph 1(b)
- 4. Lessor or Least of the above
Tax withheld
a - Footnote of IC 76-12R4 [Information Circular 76-12R4] indicates that the tax withheld may not exceed 15% of total pension payments. However, the applicable rate is 25% of the excess but subject to restrictions of paragraphs 1(a) and (b) of Article XVIII of the Convention.
b - Total pension amount includes only amounts subject to Part XIII tax.
c - In absence of a section 217 election, only amounts subject to Part XIII are included and tax cannot exceed 25% of pension in excess of $10,000.
d - 17% X Total pensions received less exemption less $6000 personal exemptions X 1.47 (.17 X XXX - 10,000 - 6000) 1.47.
Issue
Whether a paragraph 1(b) of Article XVIII entitles a non-resident taxpayer to make a 217 election and deduct the $10,000 exemption provided for in the Convention.
Position
Notwithstanding a treaty provision, a non-resident taxpayer is entitled to the full benefits available to him under the Act. In this respect he may elect under section 217 of the Act and claim any deductions provided for pursuant to subparagraph 110(1)(f)(i).
With respect to the Canada-Italy Convention, the legislators effectively wrote the elective provisions of section 217 of the Act into paragraph 1(b) of Article XVIII of the Convention for purposes of determining the applicable tax rate. The calculation of tax pursuant to paragraph 1(b) is therefore, the same calculation as provided for by section 217 of the Act and would include a deduction pursuant to 110(1)(f)(i) of the Act for the $10,000 exemption provided for by the Convention.
Subparagraph 110(1)(f)(i) provides a deduction in computing taxable income for an amount exempt from income tax in Canada by virtue of a provision in a tax convention or agreement with another country that has the force of law in Canada.
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© Her Majesty the Queen in Right of Canada, 1990
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© Sa Majesté la Reine du Chef du Canada, 1990
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