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I know Canada and the UK have a tax treaty that is designed to prevent double-taxation. But I don't know if it extends to honouring the tax-free status of government-issued savings certificates.

Details:

I have some UK National Savings & Investments index-linked savings certificates which I purchased years ago (when I lived in the UK).

Then I emigrated to Canada and I'm now a citizen and permanent resident paying Canadian taxes (I no longer submit a UK return).

I am declaring the interest from these certificates on my Canadian tax return as 'foreign income - interest', but there is a box called 'income exempt under a tax treaty'.

How do I figure out if this is exempt or not?

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  • I'm not informed enough about this exact issue to provide a firm response, but unfortunately it seems this is indeed taxable in Canada: mondaq.com/advicecentre/content/3516/…. Jun 22 at 18:46
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    If the tax paid on this would be more than a few grand, probably worth speaking to a tax accountant in Canada who specializes in immigrants. In particular, my gut tells me you might be able to have the cost basis for Canadian purposes listed as the fair value when you became a resident, but that might depend on how you disclosed departure in the UK. Again, not an answer, just trying to point you in the right direction. Jun 22 at 18:47
  • Thanks @Grade 'Eh' Bacon, yes I saw that. I was hoping a government-run savings scheme like National Savings might be treated otherwise! But the amounts in question are not that much so I just reported them as taxable in the end.
    – Bill
    Jun 22 at 18:48
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Canadians pay tax on worldwide income. Generally the tax treaty is for when you have already paid tax in the other country. My guess is that you will have to pay tax, but its worth a try to find out.

You say that the investment is not taxable in the UK.


Method 1 The easiest way to get an answer to call Revenue Canada. Your call is anonymous and you can also choose to not have them record the call.

The first level people are not up to complex questions but they are required to pass you along to more senior people when they don't know the answer. The key is in how you ask the question.

e.g. "I would like to ask a question on the treatment of foreign bonds of a tax-free nature. Could you pass me to someone knowledgeable in this area, please?"

If they try to pawn off a made-up answer, press with "Could you please give me the specific article of the Tax Act you are referring to and any Information Circulars that pertain?"

Method 2 They do have a website and the search engine is pretty good, so you can start with that.


Method 3 Another route is claim $0 and write a note on the interest income line and then attach a letter to your return, explaining that your understanding is they are not taxable hence your claim of $0 and a copy of the Saving Certificate - or page from the website showing the Tax-free nature.

=========== Of course you may know of a British taxpayer who would like to buy them from you. You'll be subject to any capital gains on the sale.

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