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Arthur Rubin
Arthur Rubin, Tax Preparer
Category: Canada Tax
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Experience:  Tax preparer with 23 years experience, including US/Canada tax returns.
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Hello, I am 66 and now a new permanent resident of Canada

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Hello,

I am 66 and now a new permanent resident of Canada - I will receive a state pension from Austria of 1800 Canadian Dollars each month (the tax is taken off in Austria according to the tax treaty). I have no other income - my wife is looking for work (will more than likely find something and earn around 30 or 40 000 a year). Do I claim a 'foreign tax credit' - not sure how this works or how much I am likely to get back (as mentioned Austria tax me at source there). Any advice appreciated or explanation as to why I might get tax credit in Canada - I do not understand. Many thanks

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As the treaty (in Article 18) does not state the income is only taxable in Austria, you will have to take a tax credit on your Canadian (and possibly Provincial or Territorial) tax return. The amount of the credit is (approximately) the lesser of the amount of foreign tax attributable to the dual-taxed income and the amount of Canadian tax attributable to the dual-taxed income..

 

 

If filing on paper, you use form T-2209 to compute the credit against your Federal taxes, and (unless you are a resident of Quebec) form T-2036 to determine your Provincial credit. Depending on your particular province's 428 form, there may be calculations there which affect what goes on the T-2036. The credit on non-business income is non-refundable and cannot be carried forward or back. (The Federal credit on business income can be carried back up to 3 years and forward up to 7 years. However, the Canadian interpretation of the treaty strongly suggests that a pension is non-business income, as involuntary contributions to a pension you would not be eligible for are considered a non-business tax.)

 

 

I hope this is of help to you. Please do not hesitate to ask further questions related to the foreign tax credit.

Arthur Rubin, Tax Preparer
Category: Canada Tax
Satisfied Customers: 1561
Experience: Tax preparer with 23 years experience, including US/Canada tax returns.
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