Canadian Money Forum banner

1 - 13 of 13 Posts

·
Banned
Joined
·
1,241 Posts
Discussion Starter #1
This probably will never happen, but I am still curious if anyone here knows the answer. I've read so many bloody CRA documents that make zero sense to me it's starting to frustrate me :(

I'm trying to figure out if someone is receiving a government pension (Federal pension/Canadian Forces pension) and is deemed a non-resident of Canada, and lives 100% of the time in another country, do you still pay the withholding 25% tax in Canada or do you pay the lesser (in this case it's lesser, Thailand) of the two countries withholding rate?

I've read stuff like this from http://www.asia-excellent.com/publication_detail.php?id=31:
Canada Pensions and similar remuneration arising from past employment in a Contracting State and paid to a resident of the other Contracting State shall be taxable only in the first-mentioned State.

And stuff like this from http://www.cra-arc.gc.ca/E/pub/tg/t4056/t4056-e.html
If you left Canada in 2013 to live in another country and you are related to or a member of the family of a deemed resident of Canada, you will generally not be considered to have emigrated from Canada if, under an agreement or convention (including a tax treaty) between Canada and the other country, 90% or more of your income from all sources is exempt from tax in that other country because of your relationship with that person.

This is just to name a couple of many confusing sites, most of which are links CRA sub-sites. (grumble).

The first link I'd like to know what they mean by first-mentioned State - I'm assuming they mean Canada but I see no definition of first-mentioned State.

The second link seems to suggest if you leave any relatives, even an Aunt, Cousin, Daughter in Canada you can never emigrate...? I'm sure this is not the case!

Does anyone here collect a government pension (or private, anything but CPP or old age) and is a non-resident of Canada? Maybe you can answer some questions I have for me please?
 

·
Registered
Joined
·
3,197 Posts
From the same CRA web page:

Will you continue to receive Canadian-source income?
Canadian financial institutions and other payers have to withhold tax at a rate of 25% on certain types of Canadian source income paid or credited to you after you become a non-resident. The most common types of income subject to non-resident withholding tax include:

interest;
dividends;
rental payments;
pension payments;
old age security pension;
Canada Pension Plan or Quebec Pension Plan benefits;
retiring allowances;
registered retirement savings plan payments;
pooled registered pension plan payments;
registered retirement income fund payments;
annuity payments; and
royalty payments.


What could be clearer?
 

·
Banned
Joined
·
1,241 Posts
Discussion Starter #3
I wish it were that easy!

This is the next sentence after what you posted:
If there is a tax treaty between Canada and your new country of residence, the terms of the treaty may reduce the rate of non-resident withholding tax on certain types of income.

I notice they list a non-resident tax calculator though, I will give that a try and see if it comes up with anything clear, if not I will phone CRA and hopefully they will be able to give me a clear answer.

And to top off the confusion, Thailand is a tax-driven country and even residents rarely pay income tax. Many expats do not pay tax on their pensions, but I prefer to know my obligations as I don't want to get caught not paying taxes I should be paying.
 

·
Registered
Joined
·
5,464 Posts
I wish it were that easy!

This is the next sentence after what you posted:
If there is a tax treaty between Canada and your new country of residence, the terms of the treaty may reduce the rate of non-resident withholding tax on certain types of income.

I notice they list a non-resident tax calculator though, I will give that a try and see if it comes up with anything clear, if not I will phone CRA and hopefully they will be able to give me a clear answer.

And to top off the confusion, Thailand is a tax-driven country and even residents rarely pay income tax. Many expats do not pay tax on their pensions, but I prefer to know my obligations as I don't want to get caught not paying taxes I should be paying.
It's actually pretty clear. OGG provided the first step - is the income taxable? Yes, pension income is taxable (or, said more clearly, subject to Canadian tax witholding for non-residents).

Next step is to determine whether there is a tax treaty between Canada and the proposed country of residence - in this case, Thailand.

If yes, third step is to read the terms of the tax treaty to determine whether the witholding rates are specified at a rate which differs from the regular 25% withholding rate.

If no, you have your answer already: the income is taxable at the Canadian withholding rate.

A CRA phone operator is not going to be able to provide you with an answer.
 

·
Banned
Joined
·
1,241 Posts
Discussion Starter #6
Yes, I'm aware there is a tax treaty with Thailand - hence my original post "do you still pay the withholding 25% tax in Canada or do you pay the lesser (in this case it's lesser, Thailand) of the two countries withholding rate?".

I found myself cross eyed just reading the first 20 paragraphs of the tax treaty agreement, but I will give it another go when my head is clear.

Here is the document (ecopy of the tax treaty) that I'm refering to: http://www.fin.gc.ca/treaties-conventions/Thailand_-eng.asp
 

·
Registered
Joined
·
5,464 Posts
The answer is (as with any non-resident receiving taxable Canadian-source income), it depends on the terms of the tax treaty. You don't need to read CRA documents or blog posts.

Article 18 deals with taxation of employment pensions. Answer: taxable in Canada only.

Article 21 deals with other income not already discussed in the treaty. Answer: taxable in Canada only.

Your answer is: the pension will be subject to 25% withholding tax but any excess will be refunded when you file your Canadian tax return. Article 22(1)(a) further clarifies this.
 

·
Registered
Joined
·
5,464 Posts
Addy - in re-reading your posts I think you may not be clear what a tax "witholding" is. There is no way for Thailand to levy a witholding tax on income you are receiving from a Canadian source - the income is paid directly to your bank account and does not move through a Thai intermediary.

Instead, the income is subject to *Canadian* witholding tax at a rate of 25%. The excess tax, if there is excess, is refunded when you file your Canadian tax return.

Tax treaties specify how taxation paid in one country interacts with tax paid in another country. They do *not* set out the tax rates for each country on every type of income; they merely specify whether a dollar of tax paid in Country 1 affects the tax payable in Country 2. In the case of Canada and Thailand, the tax treaty specifies that the tax systems are either largely or completely integrated, so that a dollar of tax paid in one country is generally deductable from the tax bill in another country.

You have already stated that Thai residents "rarely pay income tax." You should expect that your CPP and/or other Canadian-source pension income will be subject to the 25% witholding, with excess refunded depending on your total tax situation in Canada.
 

·
Banned
Joined
·
1,241 Posts
Discussion Starter #9
Thanks MoneyGal, you've helped me a great deal. I do understand the intention of a withholding tax, I just wanted to be clear on what % would be withheld. Makes more sense to me now, thank you :)

I'm still looking to speak with anyone here who collects a government pension (or private, anything but CPP or old age) and is a non-resident of Canada - chances are slim here but I'm also asking on other forums mostly expat discussion boards. Hopefully I can connect with a few who are.
 

·
Registered
Joined
·
5,464 Posts
You need to be asking about an *employment pension* not a "government pension." Government pension = understood as OAS, CPP, GIS. Pension from employment (whether your employer is a government or not) is not a "government pension" for the discussion you want to have.
 

·
Registered
Joined
·
10,517 Posts
You need to be asking about an *employment pension* not a "government pension."

Government pension = understood as OAS, CPP, GIS. Pension from employment (whether your employer is a government or not) is not a "government pension" for the discussion you want to have.
True ... though it would appear from this Service Canada link, a good chunk of the gov't pensions (ex. CPP, QPP, OAS) seem to also be subject to the 25% non-resident tax.

In addition - if one's net world wide income is higher than $69,562 for the 2012 tax year, then OAS recovery tax may come into play.
http://www.servicecanada.gc.ca/eng/services/pensions/international/taxes.shtml


Cheers
 

·
Registered
Joined
·
5,464 Posts
Yes - my comment is intended to communicate that for international tax purposes, "government pension" will be understood as OAS, CPP, etc. You could see this on the linked Canada-Thailand tax treaty, for example - it makes reference to "employment pensions".
 
1 - 13 of 13 Posts
Top