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By Gigi Suhanic
National Post
FP Money
Saturday, July 27, 2002
Question: I am a pensioner
living in Canada, receiving the old-age pension and CPP and a small
old-age pension from Switzerland. Is the pension from Switzerland
taxable in Canada?
Answer: As a Canadian,
you have to report your income from all sources, both inside and
outside Canada. If the payment is received in foreign funds, you'll
report the Canadian equivalent, says Adrian Mastracci
of Vancouver-based KCM Wealth Management.
Canadian residents receiving foreign pensions are taxed in the
same way as private pensions received from a Canadian source, subject
to the "foreign retirement arrangement" rules.
A tax treaty between Canada and the foreign country may alter the
taxation of pensions received from that country. Generally, a portion
of the pension may be exempt from tax.
Adrian Mastracci, president of
KCM Wealth Management, says “As a Canadian, you have to report
your income from all sources, both inside and outside Canada. If
the payment is received in foreign funds, you’ll report the
Canadian equivalent.”
Foreign pension income seems to qualify for the $1,000 pension
income credit to the extent that it is not protected by the treaty.
Foreign-source government pensions, similar to our OAS, may receive
special treatment under social security treaties. Therefore, it's
important to ascertain the nature of the pension.
Mr. Mastracci says he has found the consulates to be very helpful
in sorting out foreign pensions, including any income tax paid in
the country of source.
Question: Why is
it illegal for Canadians to have gold in their RRSPs? Even Perth
Mint certificates and other gold certificates are illegal, as I
understand it.
Answer: If an RRSP
purchases a "non-qualified investment" such as gold, the
value of the purchase is treated as a taxable benefit to the RRSP's
annuitant -- usually the contributor, but it could be a spouse.
There is also a 1% per month penalty tax applied to the value of
the investment, says Kevyn Nightingale.
The government's objective for RRSPs is to have people create a
retirement fund they can rely on in their old age. While the list
of qualified investments has lengthened over the years, and somewhat
more speculative investments have been allowed, there is still a
clear bias in favour of stable investments that are designed to
hold value over the long term.
There is also a bias in favour of securities issued by Canadian
companies; part of the policy rationale has been to create a captive
pool of capital for Canadian companies to access, presumably at
preferential rates.
Gold meets neither of these policy objectives, at least ostensibly.
Gold is seen as volatile, although any economist or economic historian
can tell you that over the long-term, gold holds its value. The
purchase of gold does not create a capital pool for Canadian companies
to use. While Canada produces a significant portion of the world's
gold, there is no effective way of ensuring that the gold purchased
by an RRSP would be Canadian.
However, if you want to expose your RRSP portfolio to gold, you
can buy securities of gold producers and even foreign gold producers,
to the extent of the 30% foreign property limit.
Question: I have
a dependent child and lost my job. I have been out of work for more
than a year. My girlfriend has been living with us and supporting
us. Is she head of the household? Are we dependants of her? How
do we file our tax forms?
Answer: Are you and
your girlfriend treating each other as living "common law?"
If so, you would be filing a joint declaration on both your tax
returns stating that you consider each other as partners and she
would claim you as a dependant, says Warren Baldwin.
You would need to claim her income on your tax return as part of
your "family income" for purposes of any potential child
tax credit you might receive.
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