Wyjaśnienie w sprawie podwójnego opodatkowania polskich emerytur otrzymane przez p. Bolesława Wojtaszyka od kanadyjskiego Urzędu Skarbowego.
Dear Mr. Wojtaszyk:
The Honourable Diane Lebouthillier, Minister of National Revenue, received your correspondence of February 24 and March 18, 2021, about the Canadian tax on your Polish pension. She has asked me to reply on her behalf.
In your correspondence, you write that you were incorrectly taxed in Canada on your pension from Poland based on the Convention between Canada and the Republic of Poland for The Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income.
Article 17, paragraph 1 of the Convention provides that pensions and annuities are taxable in the state where the taxpayer receiving them resides. In your case, that is Canada.
Paragraphs 2 and 3 of the same article provide that pensions and annuities may also be taxed in the state where they arise. In your case, that is Poland.
In Canada, the Income Tax Act allows a Canadian resident to claim a foreign tax credit to avoid double taxation in certain situations, such as when they are required to pay tax in Canada and abroad on the same income. The Canada Revenue Agency (CRA) has published general information on the foreign tax credit in Income Tax Folio S5-F2-C1, Foreign Tax Credit, available at canada.ca/en/revenue-agency/services/tax/technical-information/income-tax/income-tax-folios-index/series-5-international-residency/folio-2-foreign-tax-credits-deductions/income-tax-folio-s5-f2-c1-foreign-tax-credit.
Paragraph 1.74 of the folio and the example that follows show how the foreign tax credit functions. Please note that the amount of the foreign tax credit that is available for foreign non-business income tax paid by a resident of Canada is equal to the lesser of either:
• the amount of non-business-income tax paid to the foreign country (in your case, Poland) on the foreign non-business income; or
• the tax that would otherwise be payable in Canada on that income.
As a result, depending on your circumstances, the full amount of tax that you may have paid to Poland on your pension income may exceed the amount of the foreign tax credit granted in Canada on that same pension income. However, the foreign tax credit in Canada would still eliminate double taxation according to the provisions of the Convention. For more information, please see the Convention at canada.ca/en/department-finance/programs/tax-policy/tax-treaties/country/poland-convention-2012.
If you think that the CRA has made an error calculating the foreign tax credit in your 2018 and 2019 income tax and benefit returns, you can file an objection. For information about filing an objection with the CRA, please go to canada.ca/en/revenue-agency/services/about-canada-revenue-agency-cra/complaints-disputes/file-objection-cppei-appeal-minister/income-tax.
If you think you have been subject to double taxation that is contrary to the Convention, Article 23 provides for a Mutual Agreement Procedure. This provision allows you to ask for help from the Canadian Competent Authority services to resolve this issue. For information about getting help from these services, go to canada.ca/en/revenue-agency/services/forms-publications/publications/ic71-17/guidance-on-competent-authority-assistance-under-canada-s-tax-conventions.
I trust the information I have provided is helpful.