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.
XXXX M.D. Praulins (613) 957-2123
January 20, 1987
XXXX
This is in reply to your letter of November 4, 1986, concerning the Canadian tax treatment of your pension income derived from U.S. sources.
It is our understanding that you are currently considering a relocation to Canada either on a permanent basis as a resident, or alternatively as a non-resident sojourning in Canada for less than 183 days. You have indicated that you are an American citizen, and that you are in receipt of United States social security and civil service pensions.
As a Canadian resident you would be subject to tax on your world income in Canada. U.S. social security pensions are generally taxable in Canada, however, paragraph 5 of Article XVIII of the 1980 Canada-United States Income Tax Convention (the "Convention") permits Canada to tax only one-half of such payments received by its residents. In order to avoid double taxation, a Canadian foreign tax credit is allowed with respect to income tax paid to the United States equal to the lesser of (a) United States tax paid on the pension income; and (b) Canadian tax paid on that income. The civil service pension is also subject to tax in Canada and the foreign tax credit is extended in a similar manner in order to avoid double taxation.
If you reside in Canada for less than 183 days in the year, you would not incur any Canadian tax liability with respect to U.S. social security and civil service pensions received in Canada. In this case, you would be considered a non-resident for Canadian income tax purposes, and it is assumed that you would be a U.S. resident for purposes of the Convention.
We trust this is adequate for your purposes.
Yours truly,
for Director Reorganizations and Non-Resident Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch
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© Her Majesty the Queen in Right of Canada, 1987
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© Sa Majesté la Reine du Chef du Canada, 1987
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