Cross Border Tax Q&A – Canadian with UK Pension

Question

Dear Sir

This year I am eligible to claim a UK state pension for myself and my wife (as a dependent).

Over the last ten years, I have made voluntary contributions to the UK National Insurance, so as to maintain that eligibility for a pension.

How do I offset the total cost of those contributions made to that foreign pension scheme, so as to limit the amount of Canadian income tax that foreign pension might incur?

Regards

XXXXXX

Answer

Hi XXXXXX

The taxes you pay in Canada on the US pension can be offset by any withholding taxes the UK representative withholds e.g. foreign tax credit. However it’s not going to be possible to get a foreign tax credit for the voluntary payments to the government plan. The only way that would be possible would be if you were a short-term resident of the UK and your paid “social taxes” to the UK and never intended to collect a government pension when you left.

Hope that helps and don’t hesitate to give me a call if you need more clarification.

Regards

Newsglobal, CA

250-661-9417