ITA Reg 8308.2(1) pension adjustments re: foreign pensions

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Daniel
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ITA Reg 8308.2(1) pension adjustments re: foreign pensions

Post by Daniel »

[url=http://laws.justice.gc.ca/en/showdoc/cr ... b:s_8308_2]Income Tax Regulation 8308.2(1)[/url] appears to require that Canadians contributing to a 401(k) - or other foreign pension - plan self-report an arbitrary pension adjustment equal to 10% of the member's foreign compensation (presumably converted to CAD). I discovered this in 2001 when a local accountant wrote about it in the paper but have never heard of anybody actually doing this.

My questions...

1. Are you aware of this regulation?

2. Have you ever seen this reported?
nelsona
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Post by nelsona »

This is a known issue. CRA has wording to this effect in thr RRSP guide and it is expicitly explained in the PA guide T4084. It really only applies to those who work abroad but remain residnet in canada.

The reason of course is to prevent double-dipping both a 401(K) or pension and RRSP for the same US wage.

It is "self-reported' in that you need to do the calculation. I'm quite sure if you fail to report it, they will do it for you. You are required to submit your W-2 to CRA when you have worked in US, so they can figure out if you have a 401(k) (there is an entry for that) and/or a regular pension (there is a tick box for that).

The reason for the arbitrary figure is for simplicity.
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nelsona
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Post by nelsona »

Note that with the new treaty, 401(k) contributions are now treated differently than other foreign pensions, and your deductible 401(k) will now be claculated based on your RRSP limit, so the 2 are now identical.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D
Daniel
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Joined: Fri May 22, 2009 4:55 am

Post by Daniel »

Thanks nelson. I live in a border city so I personally know many people with this issue.

YOU WROTE: The reason of course is to prevent double-dipping both a 401(K) or pension and RRSP for the same US wage. >>

Makes sense but my understanding was that the 401(k) contributions are deductible on the 1040NR but not deductible on the T1. But I interpre your second post here to suggest that the treatment of 401(k) specifically is equal to RRSPs.

<< YOU WROTE: It is "self-reported' in that you need to do the calculation. I'm quite sure if you fail to report it, they will do it for you. You are required to submit your W-2 to CRA when you have worked in US, so they can figure out if you have a 401(k) (there is an entry for that) and/or a regular pension (there is a tick box for that). >>

That's what I thought but the people I've spoken to say no pension adjustment was reported by their tax preparer/accountant - nor was one assessed by CRA. Then again, I have yet to review their returns/NOAs so I'll only know for sure once I see their stuff.

[sorry, can't seem to turn on the BBCode]
nelsona
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Post by nelsona »

What was done, and what was supposed to be done are ften 2 separate things.

If you have ANY foreign pension, you are supposed to report 10% of your wages on line 206.

The rules on 401(k) have changed thus they are now deductible. but the result will be that Cdn residents cannot contribute (nor deduct) more with a combined 401(K)/RRSP that they could with an RRSP alone, and that US citizens will not be able to participate in an RRSP to a greater extent than they could to a 401(k) if they were working in US.

As I hinted, the point was to not give you double dip at building a pension, not simply limit the deduction, just like people in canada who have a pension, can't contribute the max to their RRSP, regrdless if they contribute to the pension or not. canada (rightly, in my opinion) takes the position that your foreign pension shoudl not give you an unfair leg up on Cdns, so dings your RRSP contribution room to the tune of 10% of your foreign wages.


The goal of the RRSP regime is to allow you to build up a specific maximum pension, even if their company does not preovide one. That is why the maximum and occasionally the percentage is changed from time to time.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D
Daniel
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Post by Daniel »

Thanks very much.
jolojim
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Post by jolojim »

How is the other foreign pension - plan self-report an arbitrary pension adjustment equal to 10% of the member's foreign compensation? Idon't get it.
the point was to not give you a single dip at building a pension?


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zanofanab
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Re: ITA Reg 8308.2(1) pension adjustments re: foreign pensions

Post by zanofanab »

It is happening to prevent double-dipping of 401(k) or pension of the US wage. I understand this only but if you want a piece of proper information then contact https://essayreviewuniverce.com/paperhelp-review/ they will provide you the proper knowledge about the Canadian government system of the pension or RRSP.
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