Pension taxation

Pension taxation outlines how Canadian tax law applies to pension and similar payments. In this article, the term pensions will include:
* public pensions - Old Age Security (OAS), Canada Pension (CPP), Québec Pension (QPP), US Social Security, etc.
* employer pensions - defined benefit or defined contribution
* payments (withdrawals) from individual retirement savings plans - Registered Retirement Savings Plans (RRSPs), Registered Retirement Income Funds (RRIFs), Locked-In Retirement Accounts (LIRAs), US IRAs, etc.
==Canadian source pensions paid to Canadian residents==
The Income Tax Act assesses taxes on Canadian residents on all income received. Pension payments received from Canadian payers are taxed like most other income at the individual's federal and provincial marginal tax rates. Some public pensions are means tested for income and are phased out as income rises. Tax liability can be reduced slightly through pension credits ($2000 federal; $0-2000 provincial) for some payment types. Married couples may also be able to reduce overall tax liability by opting for pension splitting on some types of pensions.
Source 	Tax Exempt?	Means Tested?	Pension Credit?	Pension Splitting?
OAS 	 	> $76,000 	 	
GIS 	YES 	> $7,300 	 	
CPP/QPP 	 	 	 	
Employer pension (age 55 and over)	 	 	YES 	YES
RRIF payment (age 65 and over) 	 	 	YES 	YES
RRSP payment (age 65 and over) 	 	 	unlikely 	unlikely
RRSP withdrawals and RRIF payments in excess of the minimum withdrawal schedule are subject to withholding taxes of 10-30%. The withholding tax is creditable against tax liability when the year's tax return is filed.
==Foreign source pensions paid to Canadian residents==
Foreign pensions received by Canadian residents are generally taxed in the same way as domestic pensions, i.e. at full marginal rates. Canadian tax liability may be reduced by a tax treaty with the source country, and Canada usually gives credit dollar for dollar for any tax withheld by the source country on a Canadian resident's tax return. (A tax treaty may also specify or reduce taxes owed on the pension to the source country. See the table in the next section for an indication, as tax treaties often treat similar payments symmetrically, but consult the tax treaty that governs before making any big decisions.)
====US source pensions====
Many Canadian pensioners spent at least part of their working careers in the United States. Such employment may create eligibility to receive pensions after coming (or coming back) to Canada.
The US withholds tax from pension payments to Canadian residents. The statutory withholding rate is 30% but the US-Canada tax treaty reduces this rate to 15% on periodic payments and to 0% on Social Security. Claiming the 15% rate of withholding requires filing the IRS W-8 BEN form with the payer. Tax withheld by the US is creditable, usually dollar for dollar, against Canadian tax on the pension received. An "early withdrawal" from an IRA to a payee under the age of 59 1/2 will usually result in additional US tax of 10% being withheld and remitted to the IRS.
Source 	Taxable Portion	Pension Credit?	Pension Splitting?
Social Security 	85% 	YES 	YES
Employer pension	100% 	YES 	YES
IRA distribution	100% 	NO 	NO
==Canadian source pensions paid to non-residents==
Part XIII of the Income Tax Act applies a flat 25% tax rate on all pension payments to non-residents. Non-resident payees do not file a Canadian tax return to pay this tax; it is withheld at source by the payer and remitted to the government of Canada. Part XIII tax may be reduced if Canada has a tax treaty with the pensioner's country, and there are almost 100 such agreements in place in 2019.
Generally, treaties reduce withholding rates below 25% only on "periodic" pension payments. (The only remaining treaty that reduces withholding tax on a non-periodic payment is with Australia, where 15% withholding applies no matter what.) The term "periodic" clearly applies to public and employer pensions that are paid monthly. The definition is less obvious in the case of payments out of individual retirement savings plans, where the plan's beneficiary is in control of both the timing and size of withdrawals. A withdrawal from an RRSP is generally not considered periodic, even if it is one in a regular series. Only withdrawals from RRIFs, i.e. matured RRSPs that are distributing pension-like payments, at an annual rate no greater than the larger of 10% or twice the prescribed age-related RRIF withdrawal rate, are considered periodic payments.
A summary of pension relevant provisions for each treaty country can be found in the table below. Information in the table was collected in November 2019, but new treaties can be agreed and old treaties amended at any time. Current treaties, as found on the Finance Department's website, should always be consulted to confirm exact language and application. 
Payee resident in 	Treaty year	OAS	CPP	Pension	Exemption	OAS clawback?	Foreign tax on OAS/CPP?
Algeria 	1999 	15%	15%	15% 	$12,000 	 	
Argentina 	1993 	15%	15%	15% 	 	NO 	
Armenia 	2004 	15%	15%	15% 	 	 	NO
Australia 	2002 	15%	15%	15% 	 	NO 	
Austria 	1999 	 	 	 	 	 	NO
Azerbaijan 	2004 	15%	15%	15% 	$12,000 	NO 	
Bangladesh 	1982 	15%	15%	15% 	 	NO 	NO
Barbados 	1980 	15%	15%	15% 	 	NO 	
Belgium 	2002 	 	 	 	 	 	NO
Brazil 	1984 	 	 	 	 	 	NO
Bulgaria 	1999 	15%	15%	15% 	 	NO 	NO
Cameroon 	1982 	 	 	 	 	 	
Chile 	1998 	 	 	 	 	 	NO
China 	1986 	 	 	 	 	 	
Colombia 	2008 	15%	15%	15% 	 	NO 	
Croatia 	1997 	15%	15%	15% 	$12,000 	 	NO
Cyprus 	1984 	15%	15%	15% 	$10,000 	NO 	NO
Czech Republic 	2001 	 	 	15% 	 	 	NO
Denmark 	1997 	 	 	 	 	 	NO
Dominican Republic 	1976 	18%	18%	18% 	 	NO 	NO
Ecuador 	2001 	15%	15%	15% 	$12,000 	NO 	
Egypt 	1983 	 	 	 	 	 	
Estonia 	1995 	 	 	15% 	 	 	
Finland 	2006 	20%	20%	20% 	 	NO 	
France 	2010 	 	 	 	 	 	NO
Gabon 	2002 	 	 	 	 	 	
Germany 	2001 	15%	15%	 	 	NO 	
Greece 	2009 	15%	15%	15% 	$15,000 	NO 	
Guyana 	1985 	 	 	 	 	 	
Hong Kong 	2012 	 	 	 	 	 	
Hungary 	1994 	15%	15%	15% 	 	NO 	
iceland 	1997 	15%	15%	15% 	 	 	NO
India 	1996 	 	 	 	 	 	NO
Indonesia 	1998 	 	 	15% 	 	 	
Ireland 	2003 	15%	15%	15% 	$12,000 	NO 	
Israel 	2016 	15%	15%	15% 	 	NO 	
Italy 	2002 	 	15%	15% 	$12,000 	 	NO
Ivory Coast 	1983 	15%	15%	15% 	 	NO 	
Jamaica 	1978 	 	 	 	 	 	
Japan 	2000 	 	 	 	 	 	
Jordan 	1999 	 	 	 	 	 	NO
Kazakhstan 	1996 	 	 	15% 	 	 	NO
Kenya 	1983 	15%	15%	15% 	 	NO 	
Korea 	2006 	 	 	15% 	 	 	NO
Kuwait 	2002 	15%	15%	15% 	 	 	
Kyrgyzstan 	1998 	 	 	15% 	 	 	
Latvia 	1995 	 	 	15% 	 	 	
Lithuania 	1996 	 	 	15% 	 	 	
Luxembourg 	1999 	 	 	 	 	 	
Malaysia 	1976 	15%	15%	15% 	 	NO 	
Malta 	1986 	15%	15%	15% 	 	NO 	
Mexico 	2006 	15%	15%	15% 	 	NO 	
Moldova 	2002 	15%	15%	15% 	 	 	NO
Mongolia 	2002 	15%	15%	15% 	 	 	NO
Morocco 	1975 	 	 	 	 	 	
Netherlands 	1997 	 	15%	15% 	 	 	
New Zealand 	2014 	15%	15%	15% 	 	NO 	
Nigeria 	1992 	 	 	 	 	 	
Norway 	2002 	15%	15%	15% 	 	NO 	
Oman 	2004 	15%	15%	15% 	 	 	NO
Pakistan 	1976 	 	 	 	 	 	NO
Papua New Guinea 	1987 	15%	15%	15% 	 	NO 	
Peru 	2001 	15%	15%	15% 	 	NO 	
Philippines 	1976 	 	 	 	$5,000 	 	NO
Poland 	2012 	15%	15%	15% 	 	NO 	
Portugal 	1999 	15%	15%	15% 	$12,000 	NO 	
Romania 	2004 	15%	15%	15% 	$12,000 	NO 	
Russia 	1995 	 	 	 	 	 	NO
Senegal 	2001 	15%	15%	15% 	$12,000 	NO 	NO
Serbia 	2012 	15%	15%	15% 	 	 	
Singapore 	2011 	 	 	 	 	 	NO
Slovak Republic 	2001 	 	 	15% 	 	 	NO
Slovenia 	2000 	 	 	15% 	 	 	
South Africa 	1995 	 	 	 	 	 	
Spain 	2014 	15%	15%	15% 	 	NO 	
Sri Lanka 	1982 	15%	15%	15% 	 	NO 	
Sweden 	1996 	 	 	 	 	 	
Switzerland 	2010 	15%	15%	15% 	 	NO 	
Taiwan 	2016 	15%	15%	15% 	 	NO 	
Tanzania 	1995 	15%	15%	15% 	 	NO 	NO
Thailand 	1984 	 	 	 	 	 	NO
Trinidad and Tobago 	1995 	15%	15%	15% 	 	NO 	NO
Tunisia 	1982 	 	 	 	 	 	
Turkey 	2009 	15%	15%	15% 	$12,000 	NO 	
Ukraine 	1996 	 	 	 	 	 	NO
United Arab Emirates	2002 	 	 	 	 	 	
United Kingdom 	2003 	0% 	0% 	0% 	 	NO 	
United States 	2007 	0% 	0% 	15% 	 	NO 	
Uzbekistan 	1999 	 	 	 	 	 	NO
Venezuela 	2001 	 	 	 	 	 	
Vietnam 	1997 	 	 	15% 	 	 	
Zambia 	1984 	15%	15%	15% 	 	NO 	
Zimbabwe 	1992 	15%	15%	15% 	 	NO 	NO
The first two columns are the country of residence and the year in which the current version of the treaty was signed. The next three columns show Canada's reduced withholding rate on a variety of periodic pension payments, with "Pension" signifying both employer pensions and RRIF withdrawals. Some treaties exempt some of the periodic pension payments from Canadian withholding taxes and apply the reduced rate only above the exemption (in Canadian dollars) shown in column 6. Claiming a dollar exemption requires applying for and receiving approval from CRA of a Form NR5 application. Column 7 marks the countries where the treaty prevents collection of what is colloquially called "OAS clawback" from non-residents with high incomes. The final column marks the countries that are forbidden by the treaty from levying taxes on CPP and OAS payments to their residents.
==Foreign source pensions paid to non-residents==
Such pensions are not subject to Canadian tax, even if the recipient is a Canadian citizen. Consult local laws and, if necessary, tax treaties between the country that pays the pension and the country where it's received.
==See also==
==References==
==External links==
* Social Security - Bogleheads
Category:Pension plans
Category:Tax planning