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.
Dear XXX
We are writing in follow-up to your telephone conversation on November 23, 1990, with Mr. Jim Wilson of this division. Our understanding of the facts is as follows:
XXX
Under the 1942 Canada-United States treaty, pensions paid by the United States to Canadian residents were taxable only in Canada. The new treaty permits the United States to tax such pensions at the rate of 15%. Based on your telephone conversation with Mr. Wilson, we understand that you are satisfied as to the rationale for a country to withhold tax at source on taxable items paid to a non-resident.
Under American sourcing rules, it is our understanding that the contribution portion of pension or annuity benefits attributable to services performed outside the United States is not considered United States source income. Accordingly, pursuant to United States domestic tax laws, a portion of these pension benefits may not be subject to United States tax.
If you choose to pursue the matter, you should contact Mr. Joe Hook, IRS Attache, United States Embassy, Ottawa, Ontario, KIP 5T1 (613-238-5335). We should emphasize, however, that Canada allows a foreign tax credit for United States taxes withheld. Accordingly, no double taxation arises. It is our understanding that XXX If this is the case, there is no additional tax burden as a result of the new treaty, other than the fact that there is now United States withholding at source which you have mentioned creates a cash flow disadvantage.
If you require any further assistance, please do not hesitate to contact me at (613) 957-2070.
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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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