Do UK pensions received in the UK and taxed there need to be listed as income on my Canadian tax form? Should it be in the box- Pension income exempt by tax treaty?
Do UK pensions received in the UK and taxed there need to be listed as income on my Canadian tax form? Should it be in the box- Pension income exempt by tax treaty?
Do UK pensions received in the UK and taxed there need to be listed as income on my Canadian tax form? Should it be in the box- Pension income exempt by tax treaty?
If you are Resident for tax purposes in Canada, you should report all world income to CRA.
By UK-Canada Tax Treaty, recurring pensions arising in the UK should be taxed only in the state where they are received, ie in Canada. In other words, the pension is tax exempt from HMRC, but fully taxable by CRA.
On the other hand, parties that receive taxable pension income in a UK account ( and thereby are assumed to be tax resident in the UK), cannot also be considered tax resident in Canada.
Do UK pensions received in the UK and taxed there need to be listed as income on my Canadian tax form? Should it be in the box- Pension income exempt by tax treaty?
I don't think you are correct. One can be tax resident in two countries.
Do UK pensions received in the UK and taxed there need to be listed as income on my Canadian tax form? Should it be in the box- Pension income exempt by tax treaty?
Check it out. I'm just citing CRA instructions and from the tax treaty, which I've read.
Do UK pensions received in the UK and taxed there need to be listed as income on my Canadian tax form? Should it be in the box- Pension income exempt by tax treaty?
Be aware that this is by no means a simple issue. I have had a UK pension paid into a UK bank account for several years now and HMRC have seen fit to deduct tax even though they KNOW I reside in Canada (because they write to me here). I thought that was how it should be - why would I think otherwise? The online tax programs have never raised a warning and have guided me to complete the Foreign Tax deducted form and CRA have accepted the T1s generated. Recently I switched to using a tax accountant because CRA decided to audit several business tax items. The tax pro continued to claim back UK tax paid - again not raising any warning flags. Then CRA decided to get nasty and advised me that the process of claiming back UK tax paid was wrong for pension income paid to Canadian residents and they want the tax going back several years. The Foreign Tax Paid form is only relevant for employment income paid in a foreign country - not pension income. I too read the tax treaty words and - guess what...they are right. I went back to HMRC and asked why they were deducting tax when the treaty clearly says they should not and they told me I had to REGISTER as a foreign resident using one of their magic forms - 12 pages, which they pointed me to on their web site. This has to be completed, certified by CRA and returned to HMRC. ONLY THEN will HMRC set a zero tax code going forward to set up what should have been done from the start (if only I had known then what I know now). HMRC say they 'may' refund tax deducted in error - I will know more when the paperwork finished its long journey. At present we are in a 3-month wait loop for CRA to respond with the completed form.
So - it seems that HMRC will deduct tax on all income paid into a UK bank account UNTIL you prove your foreign residency by completing their form. CRA will, if they look closely, refuse to accept any foreign tax deducted from pension income. Be very careful with this one - many professionals do not even understand it fully, even some HMRC and CRA staff.
Do UK pensions received in the UK and taxed there need to be listed as income on my Canadian tax form? Should it be in the box- Pension income exempt by tax treaty?
Thank you for sharing this information with the community! This is very interesting and hopefully, other recipients of UK pensions can benefit from you sharing this. Thanks again. 🙂
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