| 19(1) | File No. 5-8767 |
| R.B. Day | |
| (613) 957-2136 |
October 25, 1989
Dear 19(1)
We are writing in reply to your letter of September 14, 1989, wherein you suggested that the 25% withholding rate, applied by Canada on pension payments, is unfair and inequitable.
Our Comments
Paragraph 212(1)(h) of the Income Tax Act states, in part, that;
"Every non-resident person shall pay an income tax of 25% on every amount that a person resident in Canada pays or credits, or is deemed by Part I to pay or credit, to him as, on account or in lieu of payment of or in satisfaction of, ... a payment of a superannuation or pension benefit,..."
Unless the statutory withholding rate is reduced by virtue of an International Tax Convention, any person making such a payment is required, by law, to withhold at the 25% rate. Since the Tax Convention between Canada and South Africa was terminated on September 23, 1985, there is no provision that would permit withholding at at a lower rate in any circumstance.
We hope the above comments will be of assistance.
Yours truly,
for Director Business and General DivisionSpecialty Rulings DirectorateLegislative and IntergovernmentalAffairs Branch