Can the following deductions made by France from the salary of an individual who has been resident in Canada for less than 60 months qualify as a non-business income tax for s. 126 purposes:
- CSG ("contribution sociale généralisée" ["general social contribution"])
- CRDS ("contribution pour le remboursement de la dette sociale " [contribution for the repayment of the social debt])
- Sécurité sociale vieillesse [old age social security] (retirement)
- Pole emploi (similar, in your opinion, to Employment Insurance)
- Retraite complémentaire [supplementary pension] (according to you, mandatory)?
CRA responded:
By virtue of paragraph 1 of Article XV of the Convention, salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. …
If the employee performs employment in France while resident in Canada, France may tax the employee to the extent provided in Article XV of the Convention and Canada may allow a foreign tax credit for non-business income taxes paid by the employee to France. … 2002-0169607 states that the "contribution sociale généralisée" and the "contribution pour le remboursement de la dette sociale" qualify as a non-business income tax … since these contributions have the legal characteristics of a tax (levied without direct consideration) as opposed to social contributions which, in turn, confer on those who pay them a right to benefits. … [S]ocial security contributions generally do not qualify as income or profits taxes because they are not really taxes at all, within the judicially accepted meaning of that term. However, as an exception, the CRA will agree to treat a contribution to a public pension plan of a foreign country by a Canadian resident employee as a non-business-income tax for the purposes of section 126 … where the employee is required to make the contribution under the foreign law and it is reasonable to conclude that the employee will not derive any pecuniary benefit from the contributions given the short and temporary nature of the individual’s employment in the foreign country. This exception, however, does not seem to apply in the situation presented … .