8 December 2011 External T.I. 2011-0403951E5 - War Widow's Pension Received from Norway

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: Whether a war widow's pension received from Norway by a resident of Canada is exempt from tax in Canada.

Position: Not enough information to provide a definitive answer.

Reasons: The payment must meet the requirements under paragraph 81(1)(e) of the Act.

XXXXXXXXXX 				2011-040395
					Jason R. Ward
December 8, 2011

Dear XXXXXXXXXX :

Re: War Widow's Pension from Norway

This is in response to your letter of February 20, 2011, wherein you requested our confirmation that the war widow's pension you receive from Norway in respect of your late husband's service in the Norwegian Navy during the Second World War is exempt from Canadian income tax. For the purpose of responding to your query, we have assumed that you are a resident of Canada.

The particular situation outlined in your correspondence appears to relate to a factual one, involving one or more specific taxpayers. It is not this Directorate's practice to comment on transactions involving specific taxpayers other than in the form of an advance income tax ruling. For more information about how to obtain a ruling, please refer to Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. This Information Circular and other Canada Revenue Agency ("CRA") publications can be accessed on the internet at http://www.cra-arc.gc.ca. We are, however, prepared to provide the following general comments which may be of assistance.

Unless otherwise stated, all statutory references in this letter are references to the provisions of the Income Tax Act, R.S.C. 1985 (5th supp.) c. 1, as amended (the "Act").

In general terms, where a resident of Canada receives an amount on account or in lieu of payment of, or in satisfaction of, "a superannuation or pension benefit" arising in Norway, the full amount received, before withholding taxes, is taxable under subparagraph 56(1)(a)(i) unless a specific provision of the Act or the Canada-Norway Income Tax Convention (the "Convention") applies to exclude the amount.

However, under paragraph 81(1)(e), a pension payment received from a particular country by a resident of Canada will be exempt from taxation in Canada if the payment meets the following criteria:

• The payment is a pension payment;
• It is received on account of disability or death;
• The disability or death must have arisen out of a war;
• The country must have been an ally of Canada at the time of the war; and
• The country must grant substantially similar relief to payments referred to in paragraph 81(1)(d) of the Act arising in Canada received by a resident of that country.

Paragraph 13 of IT-397R, Amounts Excluded From Income - Statutory Exemptions and Certain Service or RCMP Pensions, Allowances and Compensation lists the countries that were allies or co-belligerents of Canada during the First and Second World Wars. Norway appears on the list of countries that were allies of Canada at the time of the Second World War.

Paragraph 81(1)(d) exempts from taxation a pension payment, an allowance or compensation received under or subject to the Pension Act, the Civilian War-related Benefits Act or the War Veterans Allowance Act, an amount received under the Gallantry Awards Order or compensation received under the regulations made under section 9 of the Aeronautics Act.

The Convention was amended effective January 1, 2003. New paragraph 4 of Article 18 (Pensions, Annuities and Alimony) provides that war veterans pensions and similar allowances arising in Canada are exempt from tax in Norway as long as they are exempt from tax in Canada. Therefore, assuming Norway gives relief under Article 18 of the Convention to those payments described in paragraph 81(1)(d) of the Act, we may conclude that the last requirement listed above for paragraph 81(1)(e) has been met.

Based on the limited information provided to us, we are unable to provide an opinion in respect of the specific situation outlined in your letter. In particular, it is not clear, based on the information provided, whether the widow's pension you receive from Norway is on account of death or disability arising out of a war. We trust, however, that the above comments will be of assistance.

Yours truly,

Mary Pat Baldwin, CA
for Director
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch