Regarding the receipt by an individual resident in Italy of periodic Canada Pension Plan (“CPP”) and Old Age Security (“OAS”) benefit payments, the Directorate found that
- Art. 18(2) of the Canada-Italy Treaty limits the tax on Canadian-source pension income (including CPP) to the lesser of 15% of the total such income exceeding $12,000 and the amount of tax (referred to as the “as-if-resident” or “AIR” amount) that a resident of Canada would pay on that income.
- Art. 18(3) of the Treaty limits the tax on OAS income to the AIR amount (with the result that “[i]n most cases, that rate of tax is 25% in accordance with subsection 212(1).”)
The Directorate also stated:
One consequence of the different treatment is that unless the AIR amount is NIL, two separate calculations will be required in respect of CPP and OAS amounts paid to a resident of Italy.