Guidance for Taxpayers Requesting Tax Treaty Relief for
Cross-Border Pension Contributions

[This guidance is current as of November 1, 2013. For new or revised tax treaties, see Tax treaties (Finance Canada).]

Introduction

In general, the Income Tax Act allows a deduction for contributions made by or on behalf of an individual to a registered pension plan in Canada and a tax credit for contributions made to the Canada Pension Plan or Quebec Pension Plan. There is no similar allowance in the Income Tax Act in respect of contributions to a foreign pension plan or foreign social security arrangement.

However, a number of Canada's tax treaties include provisions that recognize pension contributions for individuals who move from one country to another on short-term work assignments and continue to participate in a pension plan in the home country. Provided certain conditions are met, the tax treaty requires the host country to treat pension contributions made by or on behalf of the individual to a pension plan in their home country the same way for tax purposes as contributions made to a pension plan in the host country.

Purpose

The purpose of this document is to provide general guidance on how the Canada Revenue Agency (CRA) will administer the tax treaty provisions that deal with recognizing foreign pension contributions, as listed in the following tableFootnote 1.

Tax treaty between Canada and… Provision Effective date
Chile 28(7) January 1, 2000
Colombia 28(3) January 1, 2013
Ecuador 27(5) January 1, 2002
Estonia 28(4) January 1, 1996
Finland 26(7) January 1, 2007
France 29(5) January 1, 1989
Germany 29(4) January 1, 2001
Greece 28(3) January 1, 2011
Ireland 28(6) January 1, 2006
Italy Protocol January 1, 2011
Latvia 28(4) January 1, 1996
Lithuania 28(4) January 1, 1998
Netherlands 24(4) January 1, 1987
Slovenia 28(4) January 1, 2003
South Africa 27(3) January 1, 1998
Sweden 27(3) January 1, 1998
Switzerland 27(4) January 1, 1998
United Kingdom 27(7) January 1, 2005
Venezuela 28(4) January 1, 2005

This guidance applies only for pension contributions made by or on behalf of individuals. While the tax treaty provisions also apply for contributions made by employers, the tax relief available in Canada under the tax treaty generally reflects the tax treatment already afforded under Canadian domestic income tax law. Consequently, no additional guidance is provided for employer contributions.

The available tax relief in Canada depends on whether the pension plan corresponds to an employer-sponsored pension plan or an arrangement created under a social security system.

Employer-sponsored pension plans (and similar plans)

An employer-sponsored pension plan is a pension plan established by an employer, a group of employers, or a union in conjunction with such employers for the benefit of employees. It is a form of deferred compensation whose primary purpose is to provide pensions to retired employees in the form of life annuities.

When an individual moves from their home country to Canada for a temporary work assignment and continues to participate in an employer-sponsored pension plan in their home country in connection with their employment, the CRA will treat contributions made by or on behalf of the individual to the pension plan the same way for tax purposes as contributions made to a Canadian registered pension plan (RPP) if there is a provision in the tax treaty that allows foreign pension plans to be recognized. Therefore, the individual will be entitled to claim a deduction for their pension contributions in calculating their income.

The tax relief provided under the tax treaty provision is subject to the following conditions and limitations:

  • The Canadian Competent Authority must agree that the pension plan generally corresponds to a Canadian RPP.
  • The individual must have been contributing on a regular basis to the pension plan (or to another similar plan for which the plan was substituted) right before they started providing services in Canada.
  • The contributions must be attributable to employment services (referred to as "eligible services") provided by the individual in Canada and made during the period in which those services are provided.
  • The payment that the individual receives for those eligible services must be taxable in Canada.
  • The contributions are deductible only in the year in which they are made and only to the extent that they would qualify for tax relief in the home country if the individual were a resident of and provided services in that country.
  • The maximum period of eligible services for which deductions can be claimed is 60 monthsFootnote 2.
  • The maximum amount of contributions that an individual can deduct for a year is limited to the lesser of 50% of the money purchase limit for the year and 9% of the individual's earned income for the yearFootnote 3.

Contributions for past services do not qualify for tax relief nor do contributions to an individual retirement plan where there is no employer contribution.

The employer's contributions will generally not give rise to a taxable benefit to the employee. However, employee contributions withheld by an employer constitute employment income of the employee and have to be included in taxable income.

The individual's employer will generally be required to report a pension adjustment (PA)Footnote 4 on the T4 slip, Statement of Remuneration Paid, to reflect the individual's entitlement to benefits under the foreign plan. The PA will reduce the individual's registered retirement savings plan (RRSP) contribution room for the following year.

When the employer has not reported the PA, the amount must be reported by the individual on line 206 of their income tax and benefit return. For more information, refer to Form RC269, Employee Contributions to a Foreign Pension Plan or Social Security Arrangement – Non-United States Plans or Arrangements.

Social security arrangements

A social security arrangement is a government program designed to provide for the basic economic security and welfare of individuals and their dependants. The programs classified under the term "social security system" differ from one country to another, but all are the result of government legislation and are all designed to provide some kind of monetary payment to defray a loss of or a deficiency in income. These programs are typically funded with taxes and contributions paid by or on behalf of participants. A basic state pension is generally a "contribution-based" benefit, and it depends on an individual's contribution history.

Where an individual moves from their home country to Canada for a temporary work assignment and continues to participate in a social security arrangement in the home country in connection with their employment, the CRA will treat contributions made by or on behalf of the individual to a social security arrangementFootnote 5 the same way for tax purposes as contributions made to the Canada Pension Plan (CPP) or the Quebec Pension Plan (QPP)Footnote 6 if there is a provision in the tax treaty that allows social security arrangements to be recognized. Therefore, the individual will be entitled to claim a non-refundable tax credit for their qualifying social security contributions.

The tax relief provided under the tax treaty provision is subject to the following conditions and limitations:

  • The Canadian Competent Authority must agree that the social security arrangement generally corresponds to the CPP/QPP.

    Note
    Foreign social security arrangements that are subject to a social security agreement between Canada and the home country will be treated as generally corresponding to the CPP/QPP. For a list of social security agreements, see Status of Canada's Social Security Agreements (Service Canada). Note that Canada does not currently have a social security agreement with Ecuador, South Africa, or Venezuela.

  • The individual must have been contributing on a regular basis to the social security arrangement right before they started providing services in Canada.
  • The contributions must be attributable to employment services (referred to as "eligible services") provided by the individual in Canada and made during the period in which those services are provided.
  • The payment that the individual receives for those eligible services must be taxable in Canada.
  • The contributions are deductible only in the year in which they are made and only to the extent that they would qualify for tax relief in the home country if the individual were a resident of and provided services in that country.
  • The maximum period of eligible services for which deductions can be claimed is 60 monthsFootnote 7.
  • The maximum amount of tax credit that an individual can claim for a particular year is limited to the amount by which the maximum tax credit for CPP/QPP contributions for the year exceeds the amount of any tax credit claimed for the year for contributions made to the CPP/QPP.

    Note
    Any excess foreign social security contributions that qualify for tax relief but cannot be claimed as a tax credit can be treated as contributions to an RPP subject to the previously mentioned deduction limit and PA. For more information, refer to Form RC269, Employee Contributions to a Foreign Pension Plan or Social Security Arrangement – Non-United States Plans or Arrangements.

Competent Authority of Canada

The tax treaties require that the pension plan must be accepted by the competent authority of the host state as generally corresponding to a pension plan recognized as such for tax purposes by that state. In Canada, such a determination is made by submitting a request to the:

Canada Revenue Agency
Competent Authority
Tax Treaties Section
Legislative Policy Directorate
320 Queen Street, 20th Floor, Tower A, Place de Ville
Ottawa ON  K1A 0L5
Fax: 613-941-5932
Email: CA-LPD.AC-DPL@cra-arc.gc.ca

The Legislative Policy Directorate will confirm whether the pension plan generally corresponds to the Canada Pension Plan or to a pension plan that would qualify for registration in Canada. Sections 8500 to 8520 of the Income Tax Regulations describe the rules for a pension plan to be registered in Canada, and section 147.1 of the Income Tax Act provides, among other things, the definition of "money purchase limit" and the pension adjustment limits that apply to RPPs. For description of the rules, see Canada Pension Plan (Justice Canada) and Income Tax Act and its Regulations (Justice Canada).

The Canadian Competent Authority has descriptions of pension plans from the countries named below. Provided that these descriptions of the pension plans are, and continue to be, accurate, and that the taxpayer meets all of the conditions in the tax treaty and the Income Tax Act, the taxpayer will be entitled to deduct the contributions the same way they would if they were contributed to a Canadian RPP or the Canada Pension Plan in the case of a social security arrangement without having to consult the Canadian Competent Authority with respect to the particular plan. However, if the plan is not described below, is not accurately described below, or has been amended, the taxpayer has to contact the Canadian Competent Authority at the above address and provide the necessary information to make a determination.

Chile

Social security arrangement

The new social security arrangement in Chile for old age, disability, and survivor benefits, referred to as the Pension Savings Account (PSA), is administered by private institutions known as Administradoras de Fondos de Pensiones (AFPs) or Private Fund Administrators. It is funded with contributions by the employees into the Individual Capitalization Pension System. Some employees continue to contribute into the old plan for old age, disability, and survivor benefits administered by the Institute for Social Insurance Standardization (el Instituto de Normalización Previsional).

The contributions are excluded from the calculation of taxable income in Chile. Provided that the person meets all of the conditions, employee contributions to the Individual Capitalization Pension System or the Institute for Social Insurance Standardization with respect to old age, disability, and survivor benefits can be granted as a tax credit in Canada.

Employer-sponsored pension plan (and similar plans)

We do not currently have information regarding a specific employer-sponsored pension plan for Chile. Please contact the Canadian Competent Authority.

Colombia

Social security arrangement

Canada does not have a Social Security Agreement with Colombia. Please contact the Canadian Competent Authority.

Employer-sponsored pension plan (and similar plans)

We do not currently have information regarding a specific employer-sponsored pension plan for Colombia. Please contact the Canadian Competent Authority.

Ecuador

Social security arrangement

Canada does not have a social security agreement with Ecuador. Please contact the Canadian Competent Authority.

Employer-sponsored pension plan (and similar plans)

We do not currently have information regarding a specific employer-sponsored pension plan for Ecuador. Please contact the Canadian Competent Authority.

Estonia

The Estonian pension system is divided into three pillars:

Pillar I: State Pension
Pillar II: Mandatory Funded Pension
Pillar III: Supplementary Funded Pension

Pillars I and II are covered under the Canada-Estonia Social Security Agreement.

Social security arrangement

The State Pension of Estonia is funded with social tax based on the State Pension Insurance Act for all permanent residents, temporary residents, and legal refugees in Estonia. It is equivalent to Canada's Old Age Security Pension.

The Mandatory Funded Pension is withheld under the Funded Pensions Act and provides supplementary income at retirement age. In addition, the state contributes to the plan at the expense of the social tax paid for that person. Since January 1, 2007, contributions to Mandatory Funded Pension withheld pursuant to § 11(1) 1) and 2) of the Funded Pensions Act are deductible from taxable income in accordance with § 28 1 (1) of the Income Tax Act of the Republic of Estonia. Provided that the person meets all of the conditions, employee contributions to the Mandatory Funded Pension with respect to old age, disability, and survivor benefits can be granted as a tax credit in Canada.

Employer-sponsored pension plan (and similar plans)

The Supplementary Funded Pension (under Funded Pensions Act) is based on each person's voluntary decision to start saving either by contributing to a voluntary pension fund or by entering into a respective supplementary pension insurance contract with a life insurance company. The Supplementary Funded Pension contracts can be made with life insurers as pension insurance or by acquiring pension fund units at fund managers. The part of the insurance premiums paid under an insurance contract for a supplementary funded pension or the amounts paid to acquire units of a voluntary pension fund may, according to § 28 (1) 1) and 2) of the Income Tax Act of the Republic of Estonia, be deductible from taxable income. However, the Supplementary Funded Pension does not correspond to an employer-sponsored pension plan and therefore does not qualify for tax relief in Canada.

Finland

Social security arrangement

The social security arrangement in Finland is mainly comprised of two statutory pension schemes: the National Pension and the Earnings-Related Employment Pension. These guarantee pension provisions for residents of Finland in the event of old age, incapacity for work, or the death of the family breadwinner.

The National Pension is funded by the employer and with social tax under the National Pensions Act for all residents of Finland who have reached the age of 16 and is paid to persons who have not worked or to those who are eligible for only small earnings-related pensions. It is equivalent to Canada's Old Age Security Pension.

The Earnings-Related Employment Pension is mainly financed through contributions levied from the employers and from the employees under the employment pension scheme. The level of the contributions paid by the employers varies according to the Pension Act and according to the company's size. Employees pay contributions based on certain percentage shares of their wages. The contributions are deductible from taxable income in Finland under § 96 of the Finnish Income Tax Act. Provided that the person meets all of the conditions, employee contributions to the earnings-related employment pension with respect to old age, disability, and survivor benefits can be granted as a tax credit in Canada.

Employer-sponsored pension plan (and similar plans)

We do not currently have information regarding a specific employer-sponsored pension plan for Finland. Please contact the Canadian Competent Authority.

France

Social security arrangement

The social security arrangement in France is managed by the Insurance Retirement. It consists of the Caisse nationale d'assurance vieillesse des travailleurs salariés (CNAVTS) ‑ national old-age fund for employees and the Caisse régionale d'assurance vieillesse des travailleurs salariés (CRAVTS) - regional old-age fund for employees. It represents the first obligatory level of retirement for the employees of industry, trade, and services. The second obligatory level of retirement covers employees subject to special provisions.

The contributions for old age, disability, and survivor benefits are deductible from taxable income in France according to Article 156 of the Fourth section in Part II of the "Code général des impôts." Provided that the person meets all of the conditions, employee contributions to the CNAVTS and the CRAVTS and to one of the special provisions with respect to old age, disability, and survivor benefits can be granted as a tax credit in Canada.

Professional categories I - Employees from nonagricultural private sector

  • Caisse nationale d'assurance vieillesse des travailleurs salariés (CNAVTS)
  • Caisse régionale d'assurance vieillesse des travailleurs salariés (CRAVTS)

Professional categories II - Employees subject to special provisions

  • Minors: Caisse autonome nationale de la sécurité sociale dans les mines (CANSSM)
  • Employees of the Opera of Paris: Caisse de retraite des personnels de l'Opéra national de Paris
  • Employees of the Comédie française: Caisse de retraite des personnels de la Comédie
  • Employees of the Chamber of Commerce and Industry of Paris: Chambre de commerce et d'industrie de Paris
  • Employees of hospitals and locals collectivities: Caisse nationale de retraite des agents des collectivités locales (CNRACL)
  • Law clerks and employees of notaries: Caisse de retraite et de prévoyance des clercs et employés de notaires (CRPCEN)
  • Employees of national electricity and gas companies: Service I.E.G. Pensions d'EDF-GDF
  • Employees of the RATP: Département « Protection, prestations et préventions sociales » de la RATP
  • Employees of the Bank of France: Direction de l'Administration du personnel Service des pensions
  • Employees of the SNCF: Caisse de retraite de la SNCF
  • Employees of the self-sustaining port of Strasbourg: Port autonome de Strasbourg
  • Seamen: Établissement national des invalides de la marine (ENIM)
  • Public service officers: Réglementation - direction générale de l'administration et de la fonction publique
  • Public workers: Fonds spécial des pensions des ouvriers des établissements industriels de l'État
  • Employees of the Caisse autonome nationale de sécurité sociale dans les mines: Caisse autonome nationale de sécurité sociale dans les mines

Employer-sponsored pension plan (and similar plans)

Employees from the private sector are also required to contribute to a supplemental pension plan. The supplemental pension plans are grouped into two associations:

  • les régimes des cadres placés sous le contrôle de l'Association générale des institutions de retraites des cadres (AGIRC)
  • les régimes des salariés non cadres regroupés au sein de l'Association des régimes de retraites complémentaires (ARRCO)

For the list of qualifying supplemental plans, visit l'Agirc et l'Arrco Web site (available in French only).

Provided that the person meets all of the conditions, employee contributions to the AGIRC and ARRCO may be deductible in Canada.

Germany

Social security arrangement

On October 1, 2005, all the pension insurance underwriters - the Federal Insurance Institution for Salaried Employees (BfA - Bundesversicherungsanstalt für Angestellte), the 22 Regional Insurance Offices (LVA - Landesversicherungsanstalten), the Federal Miners' Insurance Institution, the Railways Insurance Office and the Mariners' Insurance Fund came together under one umbrella. They are now all under the "German Pension Insurance" (Deutsche Rentenversicherung).

For the list of qualifying German Pension Insurance agencies, visit
Deutsche Rentenversicherung Web site (available in English).

The statutory pension insurance is funded primarily through the contributions of those insured. Employees and employers each pay half of the applicable contribution rate. The employees contributions for the old age, disability, and survivor benefits are deductible from taxable income in Germany under section 10 subsection 1 No. 2(a), (b) in conjunction with subsection 3 of the Income Tax Act. Provided that the person meets all of the conditions, employee contributions to the Deutsche Rentenversicherung with respect to old age, disability, and survivor benefits can be granted as a tax credit in Canada.

Employer-sponsored pension plan (and similar plans)

Salaried professionals are required to contribute to one of the professional pension schemes of the liberal professions that are part of the structure system of retirement pension schemes in the Federal Republic of Germany. The professional pension schemes provide benefits as a compulsory system based on public law within the first pillar of the system of social security in Germany, and the salaried professionals are therefore exempted from compulsory membership in the public social insurance pension scheme in which normally all employees have to be members. Since these professional pension schemes are not covered under the Canada-Germany Social Security Agreement, they will be treated as an employer-sponsored pension plan.

The professional pension schemes for the liberal professions are available for members of special professional associations (Berufskammern). There are associations for physicians, pharmacists, architects, notaries, lawyers, tax consultants, veterinaries, chartered accountants, dentists, and psychological psychotherapists.

Altogether there are more than 85 professional pension schemes, and 81 of them are members of the Arbeitsgemeinschaft berufsständischer Versorgungseinrichtungen e.V. (ABV) in Köln.

For the list of qualifying professional pension schemes, visit ABV Web site (available in English).

The contributions are deductible from taxable income in Germany under section 10 subsection 1 No. 2(a), (b) in conjunction with subsection 3 of the Income Tax Act. Provided that the person meets all of the conditions, employee contributions to one of the berufsständische Versorgungseinrichtungen may also be deductible in Canada.

Greece

Social security arrangement

We do not currently have information regarding the social security arrangement for Greece. Please contact the Canadian Competent Authority.

Employer-sponsored pension plan (and similar plans)

We do not currently have information regarding a specific employer-sponsored pension plan for Greece. Please contact the Canadian Competent Authority.

Ireland

Social security arrangement

The social security arrangement in Ireland is administered by the Department of Social Protection (formally known as the Department of Social and Family Affairs). The social insurance contributions in Ireland are referred to as the Pay Related Social Insurance (PRSI). Most employers and employees pay social insurance contributions into the national Social Insurance Fund and the contributions are compulsory. For people in employment in Ireland, social insurance contributions are divided into different categories, known as classes or rates of contribution.

The employee contributions towards the PRSI are deductible from the computation of taxable income in Ireland under section 224 of the Income Tax Act, 1967. Provided that the person meets all of the conditions, employee contributions to the PRSI with respect to old age, disability, and survivor benefits can be granted as a tax credit in Canada.

Employer-sponsored pension plan (and similar plans)

Employer-sponsored pension plans in Ireland must be registered with the Pensions Board under the Pensions Act 1990, as amended from time to time in order to qualify. The tax legislation governing pension arrangements is Part 30, Taxes Consolidation Act 1997.

The Occupational Pension Schemes (also known as company pension plans) are set up by employers to provide benefits to their employees. The employee may be required to make a minimum contribution. For the purposes of assessing the member's liability to tax under Schedule E, paragraph 774(7)(a) of the Taxes Consolidation Act 1997 and section 233 of the Income Tax Act, 1967 provide that contributions to an exempt approved scheme are allowable as an expense under section 112 of the Income Tax Act, 1967 and therefore excluded from the calculation of taxable income in Ireland. Provided that the person meets all of the conditions, employee contributions to an Occupational Pension Scheme may also be deductible in Canada.

Italy

Social security arrangement

We do not currently have information regarding the social security arrangement for Italy. Please contact the Canadian Competent Authority.

Employer-sponsored pension plan (and similar plans)

We do not currently have information regarding a specific employer-sponsored pension plan for Italy. Please contact the Canadian Competent Authority.

Latvia

The Latvian pension system is divided into three tiers:

Tier I: Mandatory state non-funded pension scheme
Tier II: Mandatory state funded pension scheme
Tier III: Voluntary private pension scheme

Tiers I and II are covered under the Canada-Latvia Social Security Agreement.

Social security arrangement

The Mandatory State Non-Funded Pension of Latvia is regulated by the "Law on State Pensions," which came into force on January 1, 1996. This pension scheme is funded by mandatory social insurance contributions paid by the working population and part of which is set off against insurance of state pensions. The contributions are split between the employee and the employer. These mandatory contributions are administered by the State Revenue Service and the allocation of pensions is administered by the State Social Insurance Agency. Employees' mandatory contributions are deductible from taxable income in accordance with Section 10, paragraph 1, Clause 1 of the "Law on Personal Income Tax." Provided that the person meets all of the conditions, employee contributions to the mandatory state non-funded pension with respect to old age, disability, and survivor benefits can be granted as a tax credit in Canada.

The Mandatory State Funded Pension was launched on July 1, 2001. As of that date, part of everyone's social contributions in Tier I are invested into the financial market and accumulated on the personal account of the Tier II participant. Participants of Tier II do not have to pay additional social contributions.

Employer-sponsored pension plan (and similar plans)

The Voluntary Private Pension Scheme (under Private Pension Funds Act) was introduced in July 1998 and ensures the possibility for every individual according to his free choice to create additional savings for his pension in private pension funds. This Law lays down the accrual of the supplementary retirement benefit in both a defined contribution scheme and a defined benefit scheme, the types of private pension funds, the basis for their operation, the types of pension schemes, the rights and obligations of members of pension schemes, the management of assets, the competence of a custodian, as well as the supervision by the state with regard to those activities. A private pension fund (hereinafter, a pension fund) is a joint-stock company which is registered in the Commercial Register and to which, in due course of this Law, the Financial and Capital Market Commission has granted a licence for the operations of a pension fund.

There are two types of private pension funds functioning in Latvia—closed and open:

  • Employees of a company or organization can become the participants of a closed pension fund, if the fund is established by these companies or organizations.
  • Any natural person can become a participant of an open pension fund either directly or through his employer.

The name of a pension fund contains the words "pensiju fonds" ["pension fund"] with an indication as to whether it is a closed or an open pension fund. Only the closed private pension funds correspond to an employer-sponsored pension plan. Contributions to the closed private pension funds are deductible from taxable income in accordance with Section 10, paragraph 1, Clause 5 of the "Law on Personal Income Tax." Provided that the person meets all of the conditions, employee contributions to a closed private pension funds may also be deductible in Canada.

Lithuania

The Lithuanian pension system is comprised of two kinds of pension schemes:

I: State social insurance pension
II: Voluntary pension funds

Social security arrangement

The State Social Insurance Pension is administered under the Law on State Social Insurance Pensions of the Republic of Lithuania and is covered under the Canada‑Lithuania Social Security Agreement. Employment related income is subject to the social security contributions for the employees. However, contributions paid to the state's social security arrangement are not eligible for tax relief in Lithuania. Therefore they do not qualify for tax relief in Canada.

Employer-sponsored pension plan (and similar plans)

Individuals covered by Voluntary Pension Funds individually pay contributions to a territorial office of the State Insurance Fund Board under the Ministry of Social Insurance Fund Board Indicators of the Republic of Lithuania. The pension contributions paid for the benefit of a taxpayer or for the benefit of the spouse to a Voluntary Pension Fund established in the Republic of Lithuania may be deductible under Article 21 of the Lithuania Income Tax Act. The total amount of deducted expenses cannot exceed 25% of the amount calculated from the total taxable income received during the tax period. However, the Voluntary Pension Fund does not correspond to an employer-sponsored pension plan and therefore does not qualify for tax relief in Canada.

Netherlands

Social security arrangement

All residents of the Netherlands are insured under the National insurance scheme ("volksverzekeringen"), which covers among other things the statutory pension insurance scheme for old age - Algemene Ouderdomswet (AOW), which is implemented by the Sociale Verzekeringsbank (SVB). Employment related income is subject to the social security contributions for the employees. Contributions to the National insurance scheme are fully deductible under the Dutch Wage and Income Tax Act 1964. Provided that the person meets all of the conditions, employee contributions to the National insurance scheme with respect to old age, disability, and survivor benefits can be granted as a tax credit in Canada.

Employer-sponsored pension plan (and similar plans)

A qualifying pension scheme for Dutch tax purposes is defined under Article 18a, paragraph 3, of the Dutch Wage - Income Tax Act 1964 and the pension rights must be insured with a Netherlands pension insurer or a recognized foreign insurer. The plan requires that the pension payments must be used for the care of the employee (old-age pension) or his family (widower's pension, orphan's pension). Generally, there are two different types of pension plans, one based on defined benefit and the other based on defined contributions or an available premium system. Contributions to a qualifying pension scheme are generally deductible under the Dutch Wage - Income Tax Act 1964. Provided that the person meets all of the conditions, employee contributions to a qualifying pension scheme may also be deductible in Canada.

Slovenia

The Slovenian pension system is divided into three pillars:

Pillar I: State pension
Pillar II: Compulsory social insurance
Pillar III: Voluntary private personal life and annuity insurance

Pillars I and II are covered under the Canada-Slovenia Social Security Agreement.

Social security arrangement

The State Pension of Slovenia is funded for all Slovenian nationals and workers with social tax based on the Pension and Invalidity Insurance Act (ZPIZ-(1)). It is equivalent to Canada's Old Age Security Pension.

The Compulsory Social Insurance is a pay-as you-go public scheme financed by contributions paid by employers and employees. Contributions to Compulsory Social Insurance are deductible from taxable income in accordance with Articles 41(1)(2), 56, and 109(3)(4)(5) of the Slovenian Personal Income Tax Act. Provided that the person meets all of the conditions, employee contributions to the Compulsory Social Insurance with respect to old age, disability, and survivor benefits can be granted as a tax credit in Canada.

Employer-sponsored pension plan (and similar plans)

The Voluntary Private Personal Life and Annuity Insurance Schemes are defined in the Pension and Invalidity Insurance Act. These pension schemes do not benefit from any tax relief in Slovenia. These contributions are therefore not deductible in Canada.

South Africa

Social security arrangement

Canada does not have a Social Security Agreement with South Africa. Please contact the Canadian Competent Authority.

Employer-sponsored pension plan (and similar plans)

There are three types of pension schemes in South Africa:

  • Pension funds
  • Provident funds
  • Retirement annuity funds

A Pension Fund is a fund established under the Pension Funds Act No. 24 of 1956 and is referred to as a private-sector fund. These types of pension funds require the existence of an employer-employee relationship and have to be registered with the Registrar of Pensions (that is, Financial Services Board) under section 4 of the Pension Funds Act. The employee contributions to a pension fund are tax deductible (subject to limitations) under section 11(k) of the South Africa Income Tax Act No 58 of 1962. Provided that the person meets all of the conditions, employee contributions to a Pension Fund may also be deductible in Canada.

A Provident Fund is, by nature, established under the Pension Funds Act and is therefore a private-sector fund which also requires the existence of an employer-employee relationship. These provident funds could be contributory funds but in some instances there are non-contributory funds, that is, only the employer makes contributions to the fund. The employee's contributions to a provident fund are not tax deductible. Therefore these funds do not qualify for tax relief in Canada.

Retirement Annuity Funds are private pension plans established in terms of the Pension Funds Act. These plans are taken by a member in their individual capacity and accordingly the existence of an employer-employee relationship is not a requirement. Therefore, a Retirement Annuity Fund does not correspond to an employer-sponsored pension plan and does not qualify for tax relief in Canada.

Sweden

Social security arrangement

The National Old-Age Pension that is based on lifetime earnings was introduced in 1999. The old-age pension consists of income-based pension [inkomstpension], premium pension [premiepension], guaranteed pension [garantipension], and supplementary pension [tilläggspension]. Since January 1, 2010, the national old-age pension system has been administered by Swedish Pensions Agency (Pensionsmyndigheten), formally known as Social Insurance Agency [Försäkringskassan], and the Premium Pension Authority [Premiepensionsmyndigheten, PPM]. The income-based pension comes under a pay-as-you-go system whereas the premium pension is fully funded. The guaranteed pension is aimed for people with low income or no income at all. The supplementary pension is a transitional benefit that has been earned in the old pension system by persons born in 1938-1953.

The employer and the employee each pay one half of the contributions. For 2010, contributions to the National Old-Age Pension scheme are deductible from taxable income. Provided that the person meets all of the conditions, employee contributions to the National Old-Age Pension with respect to old age, disability, and survivor benefits can be granted as a tax credit in Canada.

Employer-sponsored pension plan (and similar plans)

In addition to social security benefits, practically every employee is covered by an occupational pension scheme based on a collective agreement. The four major occupational pension schemes are: ITP (the pension scheme for white-collar workers in the private sector), SAF/LO (the pension scheme for blue-collar workers in the private sector), PA-03 (the pension scheme for employees in the governmental sector), and KAP‑KL (the pension scheme for employees in the municipal sector). The contributions to the occupational pension schemes are paid by the employers.

A small number of employees however, mostly owners of small enterprises and their family members, are not covered by collective agreements. These employers often arrange individual occupational pension schemes to which they levy contributions. These contributions are for tax purposes treated in the same way as the collective agreement based occupational pension schemes, provided they meet the conditions for pension schemes that qualify for tax relief, which is usually the case. It is also possible for the employers within the contracted sector to arrange these kinds of individual occupational pension schemes alongside the collectively agreed upon occupational pension schemes.

There are no tax-favoured occupational pensions schemes of any kind to which contributions would be made by the employees. It is on the other hand possible for individuals to arrange private pension schemes (insurance or special pension accounts) that within certain limits grant the right to deduct their own contributions. The tax advantages are granted for the individual private pension schemes falling within the scope of Inkomstskattelagen (1999:1229), chapters 58-59. However, an Individual private pension scheme does not correspond to an employer-sponsored pension plan and therefore does not qualify for tax relief in Canada.

Switzerland

The Swiss pension system is divided into three pillars:

Pillar 1: State Pension
Pillar 2: Occupational Benefit Plans
Pillar 3A: Individual Provident Measures

Pillar 1 is covered under the Canada-Switzerland Social Security Agreement.

Social security arrangement

The competent authorities for Canada and Switzerland have agreed that for the purposes of Article 27(4) of the Convention, in addition to employer-sponsored pension plans in the case of Canada, and occupational benefit plans in the case of Switzerland, the term “pension plan” is understood to include a pension plan created under the social security systems of Canada and Switzerland:

In the case of Switzerland, plans covered under the:

  • Federal Law on Old Age and Survivors Insurance of December 20, 1946 (LAVS); and
  • Federal Law on Disability Insurance of June 19, 1959 (LAI).

The contributions are deductible from the calculation of taxable income in Switzerland. Provided that the person meets all of the conditions, employee contributions to the LAVS and LAI with respect to old age, disability, and survivor benefits can be granted as a tax credit in Canada.

This understanding applies in respect of taxation years that begin on or after January 1, 2012.

Employer-sponsored pension plan (and similar plans)

In addition to social security benefits, practically every employee is covered by an occupational pension scheme. Pension and retirement plans covered by the Federal Act on old age, survivors' and disabled persons' insurance payable in respect of employment of 25 June 1982 offer occupational pension plans. Tax relief is available for contributions made into a Swiss registered pension scheme. However, only contributions in an Occupational pension scheme would qualify as an employer-sponsored pension plan. Provided that the person meets all of the conditions, employee contributions to an Occupational pension scheme may also be deductible in Canada.

United Kingdom

Social security arrangement

The social security arrangement in the United Kingdom is funded with UK National Insurance Contributions (NIC) paid by employers and employees. Employers are responsible for calculating, deducting, and paying Class 1 primary NIC (employee contributions) to HM Revenue & Customs (HMRC) on behalf of all employees, including directors, earning above the earnings threshold.

However, contributions towards the NIC are not deductible or excluded from the calculation of taxable income in the United Kingdom. Therefore they do not qualify for tax relief in Canada.

Employer-sponsored pension plan (and similar plans)

Employer-sponsored pension plans in the United Kingdom must be registered under section 153 of the Finance Act 2004, as amended from time to time, in order to qualify for the full range of pension scheme tax reliefs that apply to contributions, investments, and benefits. This provision came into effect on April 6, 2006, when a single, universal regime for tax-privileged pension savings was introduced to replace the pre-existing tax-approved regimes. Occupational pension schemes, personal pension schemes (including Individual Stakeholder Plans), and certain other types of schemes all have to be registered.

Tax relief under section 188 of the Finance Act 2004 is available for contributions made into a UK registered pension scheme. However, only contributions in an Occupational pension scheme would qualify as an employer-sponsored pension plan. Provided that the person meets all of the conditions, employee contributions to an Occupational pension scheme may also be deductible in Canada.

Venezuela

Social security arrangement

Canada does not have a Social Security Agreement with Venezuela. Please contact the Canadian Competent Authority.

Employer-sponsored pension plan (and similar plans)

We do not currently have information regarding a specific employer-sponsored pension plan for Venezuela. Please contact the Canadian Competent Authority.

Footnotes

Footnote 1

This guidance does not apply to the Canada-U.S. Income Tax Convention. Although the Fifth Protocol to the Canada-U.S. tax treaty includes new provisions (Art. XVIII(8) to (17)) that recognize pension contributions, those provisions differ from the provisions with the other countries listed in the table. For more details, refer to Form RC267, Employee Contributions to a United States Retirement Plan – Temporary Assignments, and Form RC268, Employee Contributions to a United States Retirement Plan – Cross-Border Commuters, published by the CRA as well as to the technical explanation issued by the U.S. Treasury Department. Canada has also issued a statement supporting the accuracy of the technical explanation.

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Footnote 2

The maximum period under the Canada-Finland tax treaty is 48 months.

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Footnote 3

This includes payment for services provided while resident of Canada and payment for services provided while non-resident if the services are provided in Canada and the payment is not exempt from income tax in Canada by virtue of a tax convention.

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Footnote 4

For information on how to calculate foreign plan PAs, see Guide T4084, Pension Adjustment Guide.

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Footnote 5

Only the contributions with respect to old age, disability, and survivor benefits qualify for treaty relief.

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Footnote 6

The tax treaty with Switzerland does not provide relief for contributions to social security arrangements.

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Footnote 7

The maximum period under the Canada-Finland tax treaty is 48 months.

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