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(6) In general, the terms “pension,” “periodic pension payment” and “annuity” are defined in

the applicable treaty. However, if they are defined in the treaty by reference to the laws of

Canada, or are not specifically defined therein, the definition in the Income Tax Conventions

Interpretation Act must be used.

Section 217 allows non-residents who earn certain types of pension and other retirement

benefits to elect to file a Canadian tax return and pay Part I tax thereon, rather than being

subject to Canada’s 25% withholding tax on the income.

The withholding tax rate varies depending on, among other attributes, whether the

payment is a lump-sum or periodic payment, or if the payment is a pension or annuity.

Some treaties provide for an exemption for certain types of pensions or for an exemption

up to a threshold amount. Some pensions are taxable only in the source country.

(7) The treaty currently in effect with these countries includes a Most Favoured Nation clause,

which provides for reduced withholding rates if the other country signs a treaty with

another OECD member country and that treaty includes a lower withholding rate. This

clause allows the lower rate to apply to the Canadian treaty. The items of income to which

the clause applies vary by treaty. The lower withholding rate in the other country’s treaty

will apply to Canada if that treaty is signed after the date that Canada’s treaty with the

particular country is signed.

(8) A protocol or replacement treaty is signed but not yet ratified. If there are changes to

withholding tax rates in the protocol or replacement treaty, the new rates are indicated in

parentheses. Otherwise, the rates in the table continue to apply.

(9) The treaty does not apply to Hong Kong.

(10) A new treaty is signed but not yet in effect. The rates in the new treaty are indicated in

parentheses. Until ratification, the withholding tax rate is generally 25%.

(11) The following terms apply under the provisions of the Canada-U.K. treaty:

Interest—Interest is defined as income from debt claims of every kind, whether or not

secured by mortgage, and whether or not carrying a right to participate in the debtor’s

profits, including premiums and prizes attaching to bonds and debentures, as well as

income assimilated to income from money lent by the tax law of Canada or the U.K. as the

case may be. There are certain exemptions under the treaty. See also note (3).

Dividends—The 5% withholding tax rate applies if the recipient of the dividend is a

company that controls, directly or indirectly, at least 10% of the voting power of the payer.