Changes to the Taxation of Social Security Benefits for Residents of Certain Countries with Which Canada has an Income Tax Convention

There has been a change in policy regarding the taxation of Canadian social security benefits paid to residents of the tax treaty countries listed below for the purpose of the Part XIII tax and Old Age Security benefits recovery tax.

Revised Part XIII tax rates

The reduced tax rate or exemption from withholding tax provided for under Canada's tax treaties with these countries applies to Canada Pension Plan (CPP) benefits, Quebec Pension Plan (QPP) benefits, and Old Age Security (OAS) benefits. The CRA has informed Service Canada and the Régie des rentes du Québec (RRQ) of the revised withholding tax rates now in effect on the social security benefit payments administered to residents of these countries.

This table lists the countries with which Canada has an Income Tax Convention affected by the change in policy and the applicable revised Part XIII tax rates
Tax Treaty Country Periodic Pension Payments - CPP and QPP Periodic Pension Payments - OAS
Bangladesh 15% 15%
Bulgaria 15% 15%
Cyprus 1 15% 15%
Dominican Republic 18% 18%
Senegal 2 15% 15%
Tanzania 15% 15%
Trinidad & Tobago 15% 15%

Note 1
Under the Canada-Cyprus Income Tax Convention, periodic and lump sum pensions (including OAS benefits, periodic CPP/QPP and lump-sum death benefits) paid to a resident of Cyprus may be taxed in Canada but only to the extent that the total pension payments from Canada in the year exceed $10,000 or its equivalent in Cyprus pounds. Service Canada and the RRQ can apply the 15% tax rate on the gross amount of periodic CPP/QPP and periodic OAS pension payments but without regard to the $10,000 exemption limit. If you are a non-resident person and wish to request the $10,000 exemption from withholding tax, you will be required to file Form NR5, Application by a Non-Resident of Canada for a Reduction in the Amount of Non-Resident Tax Required to be Withheld. The CRA will provide the payers with written authorization to reduce the withholding tax rate accordingly.

Note 2
Under the Canada-Senegal Income Tax Convention, periodic pensions (including CPP/QPP and OAS benefits) paid to a resident of Senegal may be taxed in Canada, but only to the extent that the total periodic pension payments from Canada in the year exceed $12,000 or its equivalent in Senegalese currency. Service Canada and the RRQ can apply the 15% tax rate on the gross amount of periodic CPP/QPP and periodic OAS pension payments but without regard to the $12,000 exemption limit. If you are a non-resident person and wish to request the $12,000 exemption from withholding tax, you will be required to file Form NR5. The CRA will provide the payers with written authorization to reduce the withholding tax rate accordingly.

Overpayment of Part XIII tax

If excess Part XIII tax was withheld based on the revised rates provided above, you can apply for a refund by submitting Form NR7-R, Application for Refund of Non-Resident Part XIII Tax Withheld. Complete and send us this form no later than two years after the end of the calendar year in which the payer sent us the tax. For example, for excess tax withheld on your social security benefits during 2008, you have to send us Form NR7-R by December 31, 2010. To claim a refund of the excess tax withheld on benefits you received during the 2009 calendar year, send us form NR7-R by December 31, 2011.

Note
Do not submit Form NR7-R for the 2009 tax year if you are filing a 2009 income tax return with an election under Section 217 of the Income Tax Act. The revised rates will be considered when we process your return.

If you previously received a Notice of Assessment for Part XIII tax payable on your social security benefits under a tax treaty with a country mentioned above, an adjustment may be required to your assessment. Please contact the International Tax Services Office.

Election under Section 217 of the Income Tax Act

If you previously filed an income tax return with an election under Section 217 of the Income Tax Act, an adjustment may be required to your return if you reported benefits and were a resident of one of the countries mentioned above. Please contact the International Tax Services Office.

Old Age Security Benefits recovery tax

If you are a resident of one of the above mentioned treaty countries and are in receipt of OAS benefits, you are no longer subject to the recovery tax. Since the 2004 tax year, you are no longer required to file the Old Age Security Return of Income (OASRI).

Contacting us

To find our telephone and fax numbers, and the address, see International Tax Services Office.

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