Hi and welcome to Just Answer!Your your specific circumstances you need to apply rules from Canada-Germany tax treaty - http://www.toronto.diplo.de/contentblob/2070004/Daten/282190/download_Doppelbesteuerungsabkommen.pdf See Article 18 Pensions, Annuities and Similar Payments:
3. Notwithstanding any provision in this Agreement:(c) benefits under the social security legislation in a Contracting State paid to a resident of the other Contracting State may be taxed in that other State, but the amount of any such benefits that would be excluded from taxable income in the first mentioned State if the recipient were a resident thereof shall be exempt from taxation in that other State;
Beginning in 2003, Canada started tax the same portion of the pension payments that Germany would tax if the individual were resident in Germany. This portion is roughly based on the income earned in the pension. The chart in this publication shows the percentage of the payments that are taxable. The taxable portion depends on the age of the taxpayer on the date the pension payments first began. - http://www.cra-arc.gc.ca/tx/nnrsdnts/ntcs/grmny-eng.html
Starting 2005 a new law on taxation of old age pensions (Alterseinkünftegesetz) entered into force in Germany. In case of a pension commencement in 2005 or before the tax office determines a fixed tax-exempt amount considering a taxation rate of 50 %. The tax-exempt amount is in principle accounted for every year and during the whole retention of the pension payment.
For every new pensioner age group from 2006 onwards the taxation rate rises by two percentage points, and for every pensioner age group from 2021 it rises by one percentage point. Thus, the tax-exempt amount resulting from this declines gradually for every new pensioner age group. For pensioner age groups from the year 2040 100 % of the pension form the statutory pension insurance will be subject to taxation.
Personens who receive old age pensions from Germany and reside in Canada are therefore obliged to submit a tax declaration in Germany. Tax declaration forms can be downloaded from here - https://www.formulare-bfinv.de/ Brochure from the German Federal Ministry of Finance on the new taxation legislation for German pensions – http://www.toronto.diplo.de/contentblob/2070006/Daten/279057/download_Alterseinknftegesetz.pdf Considering small amouts of income - most likely there will not be any liability. But to be precised - all tax forms should be filled.
Thankyou for the provision of the info. I have some more questions.
So, if she got the widowers pension from Germany in 2008
she would be taxed 56 percent
of the german pension.
also she never got a german pension when she retired but I think it was from her deceased husband portion - dont know if that makes a difference?
So even if she eligible for a tax credit in Canada for what now the Germans take off, are you implying or stating with high ascertainty that her current 500 dollars she is getting - WONT be reduced because of her low net income in canada as it is?
She clears about 12g as it is OR 18g if you included the roughly 6000 from Germany
Please clarify, thanks
You seem very fluent in navigating the tax tables etc
She was 82 when she received my deceased fathers pension from Germany
Either your information is incorrect
or the in person tax person I saw today is off his rocker
German government doesnt take into consideration any social assistance provided by the country she lives in now (canada)
However, they stated, she would be paying back apprx 12.5 percent of what she was paid out yearly.
So if she got 6000 dollars - 750 dollars
Multiply that by 3 years - over 2100 dollars
I hope he is wrong vs what you initially stated that impact is minimum or none
Wonder if you will answer on this
As I mentioned above - persons who receive old age pensions from Germany and reside in Canada are therefore obliged to submit a tax declaration in Germany.If there are any tax liability in Germany depends on many circumstances - mainly on other taxable income the person has.
There are two steps in calculation of tax liability - first you determine the taxable portion of the old age pension; the second step is to add other taxable income and calculate tax liability.
Similarly - the same procedure i s for each year she received the old age pension.
The next would be to prepare Canadian tax return - and include the old age pension from Germany - it is not excluded as it was before. Canadian tax liability is calculated based on total taxable income, but if the same income is taxable in both country - there will be a credit for taxes paid to Germany.
Unfortunately I am not able to verify calculations - but that would be a procedure to follow to verify if your tax preparer is correct.