Tax Treaty Case Law around the Globe 2020

S. 261Chapter 21 Canada: The Taxation of Pension Income under Canada’s Tax Treaty with Colombia – Reyes v. Canada

David G. Duff

21.1. Introduction

Subject to a limited exception for pensions and other similar remuneration in respect of services to the government of a contracting state, the OECD Model Tax Convention (OECD Model) allocates exclusive jurisdiction for the taxation of pensions and other similar remuneration in consideration for past employment to the state in which the recipient of this income resides. Of Canada’s 94 tax treaties, only the Canada-United Kingdom Income Tax Treaty (1978) follows this approach. In contrast, 12 of Canada’s tax treaties allocate exclusive tax jurisdiction to the state in which the pension income arises, and the remainder allocate tax jurisdiction to both contracting states. These provisions sometimes apply without any limit on taxation by either state, but they more often provide exclusive jurisdiction over the taxation of social security and war pensions to the state in which this income arises. Alternatively, some of Canada’s tax treaties limit taxation by the state in which the pension income arises to (i) 15% of the gross amount of the payment; o...