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Canada’s Income Tax Act requires Canadian residents to report all worldwide income on their income tax returns. This includes offshore or foreign pension income.

Canadian residents are required to report their foreign pension income even if it is not taxable in the country where it originates such as the UK. If you have not reported your offshore pension income you may be eligible to have one of our Canadian income tax lawyers submit a voluntary disclosure to avoid penalties and prosecution and possibly reduce interest owing.

The CRA has tax treaties or agreements with various countries that affect the tax obligations of Canadians working abroad and non-residents living in Canada. These tax treaties have been established to prevent incidents of double taxation and to avoid tax evasion. These conventions define:

  • Taxes that feature cross-border tax implications
  • Tax limits on the business income of non-residents
  • Tax exemptions that apply to particular individuals
  • Procedures for tax enforcement and tax dispute resolution

Tax regulations require any recipient of a foreign pension to report the gross amount in Canadian dollars that recipient’s tax return form. You must use the Bank of Canada exchange rate that was in effect on the day that the pension was received when calculating what gross amount to report. The average annual rate or average monthly rate should be used where the pension is received periodically throughout the year. Foreign taxes should not be subtracted from any of these amounts reported; instead, a deduction can be claimed where an applicable tax treaty exists.

No. The CRA views all foreign pensions as income and, therefore, taxable. However, tax deductions to foreign pensions do apply per provisions outlined in CRA tax treaties. Foreign pensions received from a tax treaty country typically feature an amount that the CRA cannot tax.

A pensioner claims this tax deduction on line 25600 of the CRA income tax form. If you have paid taxes on a foreign pension from a non-treaty country, you can claim a foreign tax credit on the pension. You would then fill out the CRA’s Form T2209 to claim tax relief via the foreign tax credit provision.

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Pro Tip

CRA Tax Audits

There are over 350,000 tax audit and review actions conducted by the Canada Revenue Agency on a yearly basis. Around 15,000 of these tax audits deal with “cash only” businesses (i.e. the underground economy). Additionally, an estimated 35,000 are tax shelter audits.

Get your CRA tax issue solved


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